Learn everything you need to know about Utah's 529 plans including how to open a plan, make contributions, and more.
Whether it is Brigham Young, the University of Utah, or some other institution of higher learning, many children in Utah are destined to attend college in pursuit of a successful career, but the question often remains: How can parents pay for such an expensive endeavor? For many families, a college savings plan will play a prominent role, as these financial tools can offer an opportunity to grow savings over a child’s early years, and some offer significant tax advantages as well. Perhaps the best example of this type of account is the 529 plan, which is offered in one form or another by states across the country. To learn about Utah’s 529 plan and the opportunities it presents for your family, keep reading as the experts at Sootchy cover this topic at length.
Although they were first created by the federal government in Section 529 of the Internal Revenue Code, 529 plans are actually administered by the individual states, each of which offers its own take on the account (though some states offer a number of options). In Utah, accounts are offered through a program called my529, and the state only has a college savings plan, as opposed to a prepaid tuition plan or ABLE account.
However, this lack of variety doesn’t mean that families looking for a 529 plan are short on options: Any Utah resident is free to enroll in another state’s plan, just as residents of other states can take advantage of Utah’s plan. In addition, those with a my529 account have more than a dozen investment options at their disposal, so there’s flexibility within Utah’s plan as well.
The process of opening a 529 plan in Utah is simple and can be accomplished in only six steps, all of which are fairly easy to complete. We’ll walk you through this process below:
Depending on who is opening the account, you may need one of several different forms, which are designated by number. The most common of these is Form 100, the Individual Account Agreement, which is what a parent or relative will need to open an account; you’ll need Form 110 as well, which will be used to verify your signature on future transactions. Other forms include Form 102 – used by trusts or corporations – and Form 104 – used for UGMA or UTMA accounts.
When opening a my529 account, you’ll need to designate a single beneficiary for the plan. If you want, you can open multiple accounts for the same beneficiary, as long as no two use the same investment option; you can also have several accounts, each with a different beneficiary. All you’ll need to provide for this step is the beneficiary’s name, address, date of birth, and relationship to the account owner.
To ensure responsible account management, even after the death of the account owner, applicants can authorize one or two successors who can take control of the account. Individuals, trusts, corporations, and other entities can be chosen for this purpose, though it’s worth noting that they won’t have any power over the account unless the original owner passes away.
Within the scope of Utah’s my529 plan are thirteen investment options – four age-based options which get more conservative as the beneficiary approaches college age; seven static options, which remain the same over time unless the account owner makes a change; and two options that can be personalized for custom asset allocation. Each option carries a different level of risk, and each follows a different investment strategy, so you can choose the one that fits your financial goals and experience with investing.
Unlike some 529 plans, Utah’s my529 accounts don’t require an initial contribution of any size, so new account owners are free to add as much or as little to the account as they’d like. Should you choose to make an upfront deposit, you can do so when filing Form 100 or through the my529 website.
The final step in opening a 529 plan in Utah is simply to make a user account on the my529 website, which will allow you to manage the account and initiate transactions.
In contrast to the long list of regulations and requirements imposed by other states, Utah is fairly lax with its rules governing 529 plans. Anyone 18 or older can open an account, as long as they have a U.S. address and a valid Social Security or Taxpayer Identification number; the same rules apply to beneficiaries, minus the age restriction.
There is no rule requiring contributions of any particular size or frequency, and each account can receive up to $500,000 in contributions. Because the plan is sold directly by the state, not an advisor, fees are low, and there is no residency requirement, either. The funds in the account can go toward a variety of college expenses, too, not just tuition, so you’re largely free to use your 529 plan however you see fit, as long as it’s to further the beneficiary’s education.
For most individuals with a 529 plan in Utah, the tax benefits don’t extend much past the basic advantages of a 529 plan: Gains are free from federal and state income taxes, as are qualified distributions. Although many states offer deductions, Utah follows a tax credit model in which account owners – and only account owners – can file for a 5% credit on contributions of up to $2,040, or $4,080 for married couples filing jointly; this same credit is available to trusts that manage a 529 plan. Only corporations can file for a deduction, which is also available for contributions of up to $2,040 (per beneficiary). These limits are increased yearly to account for inflation.
Though the process of opening a 529 plan isn’t especially complicated, the process can take time and effort, since it relies on the Utah state government’s handling of an application. By opening your account through the Sootchy app, you can streamline the application process and make it easier than ever to contribute to the plan – not only for account owners but also for relatives, too. Learn more about the benefits of working with Sootchy by visiting us at Sootchy.com or downloading our smartphone app today.