On April 30, 2019, Virginia permanently closed enrolling in prepaid 529 plans. This plan allowed enrollees to lock in current rates on up to 10 semesters of in-state tuition/fees at public universities and colleges in Virginia. You might be asking, what are the 529 prepaid plans VA best alternatives? We break it down below.
Alternatives to Prepaid 529 Worth Considering
Coverdell Education Savings Account
If the state option fails to offer the investment option that you’re envisioning, a Coverdell ESA may be a good option. This plan permits investment in almost any security, stocks included. Beyond that, funds can be withdrawn tax-free for qualifying elementary and secondary programs, whereas 529s often don’t allow this.
This plan is especially good for those beginning early who don’t intend to invest more than $2,000 annually. In addition to the contribution limit, the money must be withdrawn by age 30 or transferred to another beneficiary.
UGMA/UTMA Accounts
Uniform Gift to Minors and Uniform Transfer to Minors Accounts allow account holders the ability to decide how the money is used, whereas 529 plans are quite specific. Therefore, this plan makes sense for those unsure the minor will require college tuition funds.
Investment securities are virtually unlimited, but the accounts do not have the tax benefits common to other accounts earmarked for college tuition. The accounts are taxed at the child’s tax rate. Furthermore, this account can impact the child’s ability to receive financial aid from a college or university because the account is an asset.
Prepaid Tuition Plans
These plans allow tuition to be paid for at the current rate. Other collegiate expenses, including room and board, are not typically eligible for fund allocation. The distinct disadvantage of this plan is that it can be only used for college and universities specific to the individual plan.
Taxable Accounts
Importantly, the parents remain the account holders for these accounts, and there are no tax benefits. This option allows for the parent to have total discretion where to spend the money: on the child’s education, the child’s living expenses during college, on trade school, or even for another purpose entirely. This option can be attractive in many circumstances, such as for a child with special needs.
The Best Alternatives after 529 Prepaid are Gone in VA
Now that 529 prepaid plans are gone in VA, other options need to be considered. We hope this brief description of options has shed light on how varied the field is for investing in your children’s education. For a more in-depth analysis of your individual goals, contact the advisors at Argent Bridge Advisors.
