Tax Advantages

Tax-Exempt Earnings
The Utah Educational Savings Plan (UESP) offers benefits that can help your money grow—and make your account tax-advantaged when April 15th rolls around. Earnings on your account will be exempt from federal income taxes as long as the money is used for qualified higher education expenses.

In addition, if you’re a Utah taxpayer, earnings on your account are also exempt from Utah state taxes if used for qualified higher education expenses.1 Since these Utah state tax benefits are only available to Utah taxpayers, taxpayers of other states should consider whether their state offers a 529 plan that would provide them with tax or other benefits not available to them through the Utah Educational Savings Plan.

Gift and Estate Planning
Beyond the usual $13,000 annual limit on tax-free gifts, you can make a special averaging election to contribute up to $65,000 per beneficiary in a single year ($130,000 if married filing jointly) without paying federal gift tax, as long as you don’t make any additional gifts to that beneficiary over the next five years. Any assets you place in a 529 plan are immediately removed from your taxable estate, yet you retain control.2 You can revoke the gift at any time, subject to taxes and penalties. Consult with your estate-planning adviser to learn how this decision will affect your estate.

Making a college investment is a gift that lasts a lifetime.

 

1 Utah Individuals: The 2009 individual Utah state tax credit amount is up to $1,740 in contributions per beneficiary multiplied by five percent, equaling $87.00 per beneficiary. If filing jointly, the maximum credit is $3,480 in contributions multiplied by five percent, equaling $174.00 per beneficiary. The credit does not phase out based on the taxpayer’s income. Married couples taking the tax benefits are not required to have separate UESP accounts.

Utah Trusts: The Utah tax credit for Utah trusts for 2009 is up to $1,740 in contributions per beneficiary multiplied by five percent, equaling $87.00 per beneficiary. A joint tax credit is not allowed for institutional accounts.

Utah Corporations: Utah corporations are eligible for a tax deduction up to $1,740 in contributions per beneficiary. A joint tax benefit is not allowed for institutional accounts.

2 Contributions between $13,000 and $65,000 made in one year can be prorated over a five-year period without incurring gift taxes or reducing your unified estate and gift tax credit. The contribution must be reported on IRS Form 709, United States Gift and Generation-Skipping Transfer Tax Form. If the account owner dies before the end of the five-year period, a prorated portion of the contribution will be included in his or her taxable estate. If you contribute less than the $65,000 maximum, additional contributions can be made without incurring gift taxes, up to a prorated level of $13,000 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.

3 Source: Commissioner’s Office, the Utah State Board of Regents. This hypothetical illustration assumes an initial investment of $10,000 with no additional funds invested, a 5% annual return compounded monthly, and a tax rate of 28% each year on the earnings portion of the account. The graph does not consider any withdrawals made from the account, or consider the impact of any applicable fees. This illustration does not represent the return on any particular investment. Future changes in applicable tax rates or other treatment of investment earnings could negatively impact this illustration. Prospective investors should consider all possible factors including investment time horizon and expected tax brackets before opening an account.

© 2009 Utah State Board of Regents, all rights reserved.
The terms Utah Educational Savings Plan and UESP are registered service marks.

Investors should read the Program Description and consider all investment objectives, risks, charges, and expenses before investing. The Program Description is available for download on the Web or a hard copy can be mailed to you by requesting it online from this Web site.

FDIC Insurance. Except for the underlying investment specified below, investments in UESP are not insured by the Federal Deposit Insurance Corporation (FDIC). FDIC insurance is provided for the FDIC-insured savings account held in trust by UESP at Zions First National Bank (Bank). Funds in the savings account are insured by the FDIC on a pass-through basis to each account owner up to the maximum amount set by federal law—currently $250,000 through December 31, 2013, and $100,000 thereafter. The amount of FDIC insurance provided to an account owner is based on the total of (1) the value of an account owner’s investment in UESP’s FDIC-insured savings account plus (2) the value of other accounts held (if any) at the Bank, as determined by the Bank and by FDIC regulations.

No Other Insurance and No Guarantees. Investments in UESP are not insured nor guaranteed by the State of Utah, UESP, the Utah State Board of Regents, the Utah Higher Education Assistance Authority, other state agencies, federal government agencies (except to the extent noted above regarding FDIC insurance ), or any employees or directors of any such entities. Units in UESP have not been registered with the United States Securities and Exchange Commission or with any state securities commission.

Account Value. The value of your UESP account may vary depending on market conditions and the performance of the investment option you select. It could be more or less than the amount you contribute; in short, your investment could lose value. However, subject to the application of Bank and FDIC rules and regulations to each account owner, funds in UESP’s FDIC-insured savings account will retain their value, whether in Option 11 or when allocated to portions of Options 2, 7, 8, and 9.

Non-Utah taxpayers and residents: You should determine whether the state in which you or your beneficiary pay taxes or live offers a 529 plan that provides state tax or other benefits not otherwise available to you by investing in UESP. You should consider such state tax treatment and benefits, if any, before investing in UESP.


Tax-Deferred Growth
over 18 years3