529 account support & FAQs
What is the minimum investment to open a plan?
You can open a Franklin Templeton 529 College Savings Plan with as little as $25 when setting up recurring contributions.
Can the funds in a Franklin Templeton 529 account be used for a school outside of New Jersey?
Yes! As long as the school is an eligible educational institution, which includes most accredited colleges, universities, vocational schools, and even some international schools, you can use your 529 savings to cover qualified education expenses.
Does the account owner own the plan?
Absolutely. The Account Owner--not the beneficiary-- controls how and when plan assets are spent for qualified education expenses.
Can the account owner change the beneficiary?
Yes, the account owner can change the beneficiary at any time. To avoid taxes, however, the new beneficiary must be a member of the previous beneficiary's family (including children, grandchildren, siblings, spouses, nieces and nephews, aunts and uncles, cousins and in-laws).1
Who can open a Franklin Templeton 529 account?
An account can be opened by an individual age 18 or older who provides a valid Taxpayer Identification Number (TIN). Trusts, custodians, governmental entities, not-for-profit corporations, and other eligible U.S. entities may also open an account but may be required to provide documentation verifying their status.
What are qualified education expenses?
Qualified expenses include tuition, mandatory fees, books, supplies, and equipment required for enrollment or attendance at eligible educational institutions, as well as room and board for students enrolled at least half-time. The funds can also cover career credentialing/technical programs, certain certified apprenticeship expenses and up to $10,000 can be applied towards the principal or interest of a student loan for the beneficiary or a sibling. In addition, up to $20,000 per year can also be used for expenses at private, public, and religious K-12 schools, although state tax consequences may vary.2
What happens if the beneficiary does not go to college?
If the beneficiary does not go to college, there are several options:
- Keep the savings invested for potential education expenses in the future.
- Change the beneficiary to another eligible family member.
- Withdraw the funds, subject to income tax and a 10% federal penalty on the earnings portion.
- Transfer unused funds from the 529 education savings plan to a Roth IRA.3
Can I change the investment options?
Yes, you can change the investment options twice per calendar year per federal 529 plan guidelines, or upon a change in beneficiary.
How do I withdraw funds from the account?
Withdrawals can be requested online, by mail, or by phone. Withdrawals for qualified education expenses are tax-free. Non-qualified withdrawals are subject to income tax and a 10% federal penalty on the earnings portion.
How are withdrawals reported to the IRS?
The account owner or the student will receive IRS Form 1099-Q in the first quarter, if the account owner made a withdrawal the previous year. Note: If the account owner received the money, then they get the form. If the child or school received the money, the child will get the form.
This form will show gross distributions, earnings, and principal. If any of the earnings are considered taxable, they should be reported on Form 1040 as part of a federal income tax return. Be sure that your clients keep records of all qualified expenses.
What is a Trump Account?
A Trump Account is a tax-advantaged investment account established for an eligible child. During the growth period, contributions can be invested in qualifying low-cost U.S. index investments. Beginning in the calendar year the child turns 18, the account generally becomes subject to traditional IRA rules.
Can a Trump Account be used for college?
After the growth period, traditional IRA rules generally apply. If money is withdrawn for qualified higher education expenses, the taxable portion of the withdrawal is generally subject to ordinary income tax, but it may qualify for an exception to the additional 10% early-withdrawal tax.
How does a Trump account differ from 529 plan?
A Trump Account supports long-term savings for a child, while a 529 plan is specifically designed to provide tax advantages for qualified education expenses.
Can my child have both a Trump Account and a 529 plan?
Yes. A Trump Account does not replace a 529 plan. A family may use a 529 for education costs and a Trump Account for longer-term savings.
Footnotes
- Refer to the Program Description for additional information.
- Qualified education expenses and eligible institutions are defined by federal law and are subject to change. K–12 tuition distributions are limited to up to $20,000 per beneficiary per year. State tax treatment of K–12 distributions may differ from federal tax treatment. Student loan repayment distributions are limited to a lifetime maximum of $10,000 per beneficiary and $10,000 per eligible sibling. Roth IRA rollovers are subject to a $35,000 lifetime limit, account age requirements, annual Roth IRA contribution limits, and other federal requirements. Earnings on distributions used for non-qualified expenses may be subject to federal and state taxes and an additional tax. Consult your tax advisor regarding your specific situation.
- SECURE Act 2.0. Transfers are subject to Roth IRA contribution limits, and the account must have been open for more than 15 years. Other conditions apply. For more information please visit: https://www.finance.senate.gov.
All investments involve risk including possible loss of principal.
Investors should carefully consider the 529 plan’s investment goals, risks, charges and expenses before investing. To obtain the Program Description, which contains this and other information, talk to your financial professional or call Franklin Distributors, LLC, the manager and underwriter for the 529 plan at (800) DIAL BEN/342-5236 or visit franklintempleton.com. You should read the Program Description carefully before investing and consider whether your, or the beneficiary’s, home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in its qualified tuition program.
Franklin Templeton’s 529 College Savings Plan is offered and administered by the New Jersey Higher Education Student Assistance Authority (HESAA); managed and distributed by Franklin Distributors, LLC, an affiliate of Franklin Resources, Inc.,
which operates as Franklin Templeton.
Investments in Franklin Templeton’s 529 College Savings Plan are not insured by the FDIC or any other government agency and are not deposits or other obligations of any depository institution. Investments are not guaranteed by the State of New Jersey, Franklin Templeton, or its affiliates and are subject to risks, including loss of principal amount invested. Investing in the plan does not guarantee admission to any particular primary, secondary school or college, or sufficient funds for primary, secondary school or college.
This material is being provided for general informational and educational purposes and should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel and provided for educational and informational purposes only. Franklin Templeton does not provide legal or tax advice. Federal and state laws and regulations are complex and subject to change, which can materially impact your results. Franklin Templeton cannot guarantee that such information is accurate, complete or timely; and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.