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Facts About Wyoming's 529 Plans

By    |   Friday, 29 May 2015 10:35 AM

The 529 college savings plan was born when it was added the to the Internal Revenue Code (IRC) of the U.S. in 1997, and then strengthened by the Economic Growth and Tax Relief Reconciliation Acts of 2001.

Named after section 529 of the IRC, 529 plans are economic savings plan that parents and others can use to set aside funds for children to use for their higher education costs, often at a significant tax savings.

These 529 plans originated at the state level and continue to be monitored and offered by each individual state, either in the form of a consumer plan or an advisor-sold plan.

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However, since 2006, Wyoming has not had a 529 plan of its own. For five years after terminating the state's plan, the state set up an agreement with the CollegeInvest plan offered by Colorado that allowed Wyoming residents to participate in that state's 529 plans under in-state resident terms.

However, since 2011, that agreement ended and, as of 2015, Wyoming remains the only state in the union without a 529 plan of its own. Here is a look at some options Wyoming residents can use to help save for their loved one's education costs:

1. Custodial Savings Accounts

Creating a custodial savings account allows an adult to save money for a child. The way that one of these accounts works is that a parent, guardian, or other adult opens an account in the child's name. The money is managed by the person who sets up the account and is considered a regular taxable account.

However, any money earned by the account is filed as part of the child's tax return rather than the adult who set up the account, and is generally taxed at an extremely favorable rate. When the child turns 18 years of age, the management of the account is given to him or her, and that person can use it toward funding his or her education, or for any purpose he or she desires.

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2. Coverdell Education Savings Account
Unlike 529 plans, the Coverdell Education Savings Account (ESA) has no restrictions on how the money in the account can be invested. This means that person setting up the account can put the money saved in the account into bonds, exchange-traded funds, mutual funds, stocks, or any other form of investment without being penalized.

However, like 529 plans, the income in an ESA is tax-free when the funds are withdrawn and used to education expenses, The only drawback to ESA, as of 2015, is that they have a low contribution limit annually. Contributions are limited to $2,000 per year. This usually entails having to set up more than one ESA per child.

3. Personal Savings Account

Parents may simply choose to put the money aside in one of their own personal savings accounts. Although there are no limitations on contributions or how the money can be invested, the tax rate is the same as any regular savings account, and does not earn any exempt status related to education costs.

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The 529 college savings plan was born when it was added the to the Internal Revenue Code (IRC) of the U.S. in 1997, and then strengthened by the Economic Growth and Tax Relief Reconciliation Acts of 2001.
529 plan, facts, wyoming
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2015-35-29
Friday, 29 May 2015 10:35 AM
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