Kim Finkle, MBA, Financial Advisor

 

How Does The Utah my529 Plan Work? 

The my529 plan is a state-sponsored plan that offers an equity-based portfolio. A program can be selected based on their child's age, investment style, and risk tolerance. All contributions to accounts grow on a tax-deferred basis.

Tracy Dean of Tracy Dean Financial - financial services firm that specializes in serving diversity clients including LGBT called Utah 529 "GOLD" based on a Morningstar report.

'Morningstar’s best and worst 529 plans' https://t.co/Oly70836hN via @investmentnews

HINT:Utah’s MY529 plan is GOLD #utah529

— Tracey Dean (@Advisorslc) October 30, 2021

 

 

Enrollment Requirement  

Any U.S. citizen or resident with a valid Social Security number or taxpayer ID can open an account. The account owner can also designate a beneficiary who is a future student. Anyone related or unrelated to the beneficiary can contribute to the account. 

 

Educational Programs Funded By ScholarShare

• K-12 - The plan can pay tuition expenses at public, private, or religious schools.
• Apprenticeship - This plan can pay for students who are opting for apprenticeships over a four-year college degree. The plan allows a student to pay books, equipment, fees, and supplies for on-the-job training with classroom instruction in Utah or USA. The apprenticeship program must be registered with the U.S. Department of Labor.
• Vocational School - The plan can be used to pay for a vocational school anywhere in Utah or USA. A future tradesman/woman can pay for all qualified expenses including tuition, fees, housing, meal plans, books, supplies, computer technology, and equipment.
• Graduate and Undergraduate College - The plan can pay for qualified expenses including tuition, fees, housing, meal plans, books, supplies, computer technology, and equipment at any college or university in the U.S. as well as some international schools. 
• Continuing Education - The reality today is that to stay competitive in the job market we have to continue upgrading our skills. That may require us to go back to school to pursue a continuing education program or a degree program. The plan can pay for tuition, fees, housing, meal plans, books, supplies, computer technology, and equipment at a qualified institution. 

Ann Garcia, CFP - a Certified Financial Planner recommends using Utah529 to fund K-12 education for your child, if your state's own plan doesn't do so. She also cautions against the advisor sold plans as they charge a management fee for something that is DIY.

- If you want to use your 529 for K-12 expenses, check if your state allows that. If not, use Utah's my529 or the Vanguard plan.
- Avoid advisor-sold plans or any plan where your advisor charges a management fee. 529s are very well suited to DIY saving and investing.

— Ann Garcia, CFP® (@collegefinanci2) December 15, 2021

 

 

Benefits of Utah 529 Plan

• Tax-Deferred - All earnings on the plan are tax-deferred. The qualified distributions are also exempt from federal taxes if residency requirements are met. In addition to that, a couple can deduct up to $10,000 per year and a divorced or separated parent can deduct up to $5,000.
• Federal Tax Exemption - All qualified distributions for up to $10,000 per student per year are exempt from federal income tax.
• Utah State Tax Credit - The qualified distributions are also exempt from the state tax. A 4.95% state income tax credit is available to individuals, couples, trusts. Corporations can also get a 4.95% income tax deduction for contributions.
• Supports in-state and out-of-state schools - You can use your savings for schools inside Utah or outside.
• Estate Planning - A married couple can take advantage of five years' worth of federal tax-free gifts at one time and contribute $150,000. For single, divorced, and separated parents, the limit is $75,000 per person. 
• Rollover - You can also rollover from another state's plan.
• Flexibility - Designate a new beneficiary if the current beneficiary doesn't want to attend college.
• Plan Limit - The plan limit is $525,000, much higher than some other states.  
• Loan Repayment - The plan allows repayment of up to $10,000 on any qualified education loan of either a 529 plan beneficiary or a sibling of the beneficiary.

 

How to Enroll 

• You can enroll by going to the my529 plan website.

 

Criticism for Utah my529 Plan

• Since the plan mainly invests in the stock market, the plan beneficiary may not have enough funds due to the market fluctuations.  
• Some distributions may be taxable.
• It gives an unfair advantage to the rich since they can save faster. 

 

Co-parents and Utah my529

The my529 plan can be a good option for divorced and separated parents residing in and out of Utah. It can also be a good investment for those who want to send their child to either a Mormon college in Utah or a public college. The high plan limit allows parents to save more than enough to fund their child's education anywhere in the US.  

 

Since co-parents have separate finances and only one person can start a my529 plan, both parents can start one separately for the same child, and fund half of the balance. This way, if the child decides not to attend college or they need to withdraw funds for some other reason or assign a different beneficiary for their portion, they can do so easily. Alternately, one parent can fund the entire plan and the other one can reimburse them for their half. Another option is that they can start 529 plans in different states and fund half each.

 

Comparison With Other 529 Plans

Feature	Utah	Arizona	Washington
Max Contribution	$525,000	$518,000	4 Yr. Tuition
Full In-state Tuition	Yes	Yes	Yes
Full Out-of-state Tuition	Yes	Yes	No (Partial)
State Tax Exemption	Yes	Yes	N/A
Federal Tax Exemption	Yes	Yes	Yes
Primary Contributors	Anyone	Anyone	Anyone
Student Loan Repayment Option	Yes	Yes	No
Plan Review		Link	Link

 

Warning:  This post is neither financial, health, legal, or personal advice nor a substitute for the advice offered by a professional. These are serious matters, and the help of a professional is recommended as it can impact your future.