Compare college savings plans

Merrill Edge® offers different options to help you plan for college. Choose the account that best meets your college savings needs.

529 college savings plans

A state-sponsored, tax-advantaged plan to help you save for higher education.

Custodial account (UGMA/UTMA)

A taxable custodial account invested on behalf of a minor that can be used for any expense that benefits that minor.
See which plan may best meet your needs.

Features and benefits

529 Plans

Invest money for higher education and receive tax-deferred growth. Money can be withdrawn federal, and often state, tax free for qualified higher education expenses.1,2

Custodial

Investments made on behalf of a minor can be used for any expenses that benefits that minor. Minor will own the assets upon reaching vesting age. Vesting age varies by state.

What it covers

529 Plans

Plans cover qualified higher education expenses, including tuition fees, books, room and board, and certain expenses for special needs beneficiaries.1,3

Custodial

There are no restrictions as long as the funds benefit the minor.

Investment options

529 Plans

Options vary by plan. Most plans offer investment portfolios consisting of underlying mutual funds or individual mutual fund options.

Custodial

There are no restrictions other than those imposed by state laws.

Changing the beneficiary

Custodial

The beneficiary cannot be changed.

Tax advantages

529 Plans

Earnings have the opportunity to grow tax-deferred and withdrawals are federal, and often state, tax free when used for qualified expenses.1 Earnings portion of nonqualified withdrawals is subject to federal and state income tax plus an additional 10% federal tax.7 Contributions up to $15,000 for an individual and $30,000 for a married couple annually, or up to $75,000 for and individual or $150,000 for a married couple during a 5-year period are gift tax free.5

Custodial

For 2018, the first $1,050 of a child's income generally is tax exempt, the next $1,050 of unearned income is generally taxed at the child's tax rate, and unearned income over $2,100 is generally taxed at the parent's tax rate if the child is under age 19 or is a full-time student under age 24. Annual contributions up to $15,000 for individuals and $30,000 for married couples are gift tax free.5

Impact on financial aid

529 Plans

If the plan is owned by the parent, it may be more favorable in determining the Expected Family Contribution (EFC), as it is treated as a parental asset.6

Custodial

The account may be less favorable in determining the Expected Family Contribution (EFC), as it is treated as the minor's asset.

Contribution and age limits

529 Plans

Most plans allow contributions in excess of $250,000 per beneficiary. Gift tax restrictions apply.5 There are no age limits on contributions or withdrawals.

Custodial

Annual contributions up to $15,000 for individuals or $30,000 for married couples are gift tax free.8 There is no statutorily imposed maximum contribution. There are no age limits on contributions or withdrawals.

Income limits

529 and Custodial

There are no income limits.
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Important disclosures

Please remember there's always the potential of losing money when you invest in securities.
Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
1 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.
2 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.
3 The beneficiary must be attending an accredited institution at least half time for room and board to be considered an eligible expense.
4 The account owner can change the beneficiary to another member of the family of the original beneficiary without penalty. Please refer to the Internal Revenue Code definition of "member of the family." If assets are contributed from an UGMA/UTMA account, the custodian may not change the designated minor, except as permitted by applicable law.
5 For 2018, contributions can be made up to the federal gift tax exclusion limit of $15,000 per beneficiary per year ($30,000 for married couples) without incurring federal gift taxes or generation-skipping transfer tax. Although, under the Internal Revenue Service five-year gift rule, you can take advantage of a forward gifting provision that allows you to contribute up to $75,000 ($150,000 for married couples filing jointly) per beneficiary in a single year without incurring gift tax. Contributions between $15,000 and $75,000 ($30,000 and $150,000 for married couples filing jointly) made in one year can be prorated over a five-year period without subjecting you to gift tax or reducing your federal unified estate and gift tax credit. If you contribute less than the $75,000 ($150,000 for married couples filing jointly) maximum, additional contributions can be made without you being subject to federal gift tax, up to a prorated level of $15,000 ($30,000 for married couples filing jointly) per year. Gift taxation may result if a contribution exceeds the available annual gift tax exclusion amount remaining for a given beneficiary in the year of contribution. For contributions between $15,000 and $75,000 ($30,000 and $150,000 for married couples filing jointly) made in one year, if the account owner dies before the end of the five-year period, a prorated portion of the contribution may be included in his or her estate for estate tax purposes. Please consult your tax and/or legal advisor for such guidance.
6 Financial aid rules may change, and the rules in effect at the time the beneficiary applies may be different. For more complete information visit the Department of Education Web site at www.ed.gov.
7 The 10% additional tax does not apply to withdrawals as a result of the designated beneficiary receiving a scholarship or the designated beneficiary's attendance at a U.S. military academy provided the withdrawals do not exceed the amount of the scholarship or value of attendance at the academy. The 10% additional tax also does not apply as a result of withdrawals made due to the death or disability of the designated beneficiary.
8 For 2018, individuals can gift up to $75,000 ($150,000 for married couples filing jointly) per beneficiary in a single year without incurring gift tax. Contributions between $15,000 and $75,000 ($30,000 and $150,000 for married couples filing jointly) made in one year can be prorated over a five-year period without subjecting you to gift tax or reducing your federal unified estate and gift tax credit. If you contribute less than the $75,000 ($150,000 for married couples filing jointly) maximum, additional contributions can be made without you being subject to federal gift tax, up to a prorated level of $15,000 ($30,000 for married couples filing jointly) per year. Gift taxation may result if a contribution exceeds the available annual gift tax exclusion amount remaining for a given beneficiary in the year of contribution. For contributions between $15,000 and $75,000 ($30,000 and $150,000 for married couples filing jointly) made in one year, if the account owner dies before the end of the five-year period, a prorated portion of the contribution may be included in his or her estate for estate tax purposes.
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Before you invest in a Section 529 plan, request the plan's official statement from your Financial Solutions Advisor 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 state benefits such as financial aid, scholarship funds and protection against creditors that are only available for investments in such state's 529 plan. Section 529 plans are not guaranteed by any state or federal agency.