You can open a Franklin Templeton 529 College Savings Plan with as little as $25 when setting up recurring contributions. The maximum aggregate plan balance per beneficiary is $305,000.1
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.
Absolutely. The Account Owner--not the beneficiary-- controls how and when plan assets are spent for qualified education expenses.
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
Any U.S. citizen or resident alien with a valid Social Security number or Taxpayer Identification Number can open a Franklin Templeton 529 account. There are no income limits for the account owner.
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 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 $10,000 per year can also be used for tuition expenses at private, public, and religious K-12 schools, although state tax consequences may vary.2
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
Yes, you can change the investment options twice per calendar year per federal 529 plan guidelines, or upon a change in beneficiary.
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.
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.
- Refer to the Program Description for additional information.
- The Federal Tax Cuts and Jobs Act (TCJA), which was signed into law in December 2017 and became effective January 1, 2018, expanded the definition of a qualified higher education expense to include up to $10,000 (federal tax-free withdrawals) per year in tuition expenses at private, public and religious elementary and secondary schools (K -12). The state tax consequences of using 529 plans for elementary or secondary education tuition expenses will vary depending on state law and may include recapture of tax deductions received from the original state and may also include taxes and penalties. Some states do not offer state tax deductions or tax credits for K -12 tuition, and other restrictions may apply.
- 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.