Education funding
Investment decisions are highly personal. Moreover, planning and saving early is important when it comes to education funding. With extensive expertise and a variety of products, Frost can help you navigate your options to make smart, informed choices so you can reach your savings goals.
529 plans
529 plans have long been a valuable option for education savings, offering significant tax advantages. Earnings within the plan grow tax deferred, and withdrawals are tax free when used for eligible education expenses, such as tuition, fees and other qualified costs.
- Funds can be used for a wide range of education expenses, including college tuition, K-12 private school tuition and trade schools
- Contributions can be made by any third party, such as family or friends, and while there are no specific annual contribution limits, contributions above the annual gift tax exclusion may have tax implications1
- There are no age restrictions for beneficiaries, and the account’s beneficiary can be changed to another qualified family member
- Beginning in 2024, unused funds in a 529 plan can be rolled over into a Roth IRA in the beneficiary’s name as long as certain conditions are met2
For additional information on when taxes would apply, click here.
Coverdell accounts
A Coverdell education savings account (ESA) helps you save for educational expenses while enjoying similar tax advantages of the 529 plan: contributions aren’t tax deductible, but earnings on growth are. Like 529 plans, Coverdell ESAs can be used to fund any education expense (such as private secondary school) — not just college.
- Can be used for all educational expenses, starting with kindergarten
- Contributions must be made in cash and are not deductible
- Contributions are limited to $2,000 annually
- Must be used by the time the beneficiary is 30 years old
- No annual restrictions on changing investment allocation
Custodial accounts
Though not solely intended for educational expenses, custodial accounts (Uniform Gifts to Minors Act, or UGMA; Uniform Transfers to Minors Act, or UTMA) are a tax-preferred way for parents, grandparents and other relatives to transfer assets to a child. When the child turns 18 or 21, depending on the state of residence (21 in Texas), they can use these assets however they wish, including for college.
- Assets and income are owned by the child, not the custodian
- Assets and income are taxed at the child’s rate (over a certain threshold, they are taxed at the parent’s rate)
- May impact a child’s eligibility for financial aid
- Doesn’t have to be used for educational purposes
Who can contribute
Open an account
To open an education savings account, a custodial account or to speak with a Frost wealth advisor about your educational savings goals, give us a call at (888) 268-9202.