NOTE: Certain states may offer tax or other benefits for investing in their Section 529 plan. Some states may reduce or eliminate those benefits for investments in Section 529 plans administered by a state other than your home state or your beneficiary's home state. It is important to carefully consider any benefits available in your home state (or the home state of your designated beneficiary), along with a plan's investment manager, investment options, plan performance and underlying fees and expenses prior to investing. Certain states also may require the recapture of all or part of previously claimed tax benefits if the proceeds are not used for qualified higher education expenses (as defined by the federal tax law) or if the assets are transferred to another state's Section 529 plan.
Please remember there's always the potential of losing money when you invest in securities.
Before you invest in a Section 529 plan, request the plan's official statement and read it carefully. The official statement contains more complete information, including investment objectives, charges, expenses and risks of investing in the 529 plan, which you should consider carefully before investing. You should also consider whether your home state or your beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's 529 plan.
1 Section 529 plans are established by various states and are offered to residents of all states. Depending on the laws of the customer's home state, favorable tax treatment for investing in a Section 529 plan may be limited to investments made in a Section 529 plan offered by the customer's home state. Neither Merrill Lynch, Pierce, Fenner & Smith Incorporated nor any of its subsidiaries are tax or legal advisors. We suggest you consult your personal tax or legal advisor before making tax or legal-related investment decisions.
2 To be eligible for favorable tax treatment afforded to any earnings portion of withdrawals from Section 529 accounts, such withdrawals must be used for "qualified higher education expenses," as defined in the Internal Revenue Code. Any earnings withdrawn that are not used for such expenses are subject to federal income tax and may be subject to a 10% additional federal tax, as well as applicable state and local income taxes.
3 To be eligible for favorable tax treatment afforded to any earnings portion of withdrawals from Coverdell ESAs, withdrawals must be used for "qualified higher education expenses" or "qualified elementary and secondary education expenses," as defined in the Internal Revenue Code. Any earnings withdrawn that are not used for such expenses are subject to federal income tax and may be subject to a 10% additional federal tax as well as state and local income taxes. Unless extended, certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 will expire after December 31, 2012, resulting in changes affecting Coverdell ESAs. These changes would include the following (among others): (1) distributions for elementary and secondary education expenses would no longer be federal income tax-free; (2) expenses for academic tutoring, uniforms, transportation, supplementary items, and expenses incurred by special needs beneficiaries would no longer be qualified expenses; and (3) contributions would not be permitted to both a Section 529 account and a Coverdell ESA in the same year for the same beneficiary, and an excise tax would apply.