Compare College Savings Plans

College costs may be rising, but there are more choices for college saving today than ever before. Our comparison chart outlines the key differences between 529 plans, Coverdell Education Savings Accounts and UGMA/UTMA Accounts. While all these options have a place in the college planning equation, we believe the flexibility and high contribution limits of 529s set them apart.

Comparison Chart

  Tomorrow’s Scholar 529 Plan Coverdell ESA UGMA/UTMA
Control of Account Plan owner (usually parents) has control throughout the life of the account Trustee or custodian has control until age of majority, then assets belong to child Custodian has control until age of majority, then assets belong to child
Uses and Restrictions Qualified expenses at almost any post-secondary school Qualified expenses at public or private primary, secondary, or post-secondary schools No restrictions
Contribution Limit Tomorrow's Scholar allows $472,000 per beneficiary $2,000 per minor child per year (2019) Unlimited
Income Eligibility No limits Phases out for single filers at $95,000 to $110,000; for joint filers $190,000 to $220,000 No limits
Change in Beneficiary Can be transferred to another eligible member of the family at any time Can be transferred to another eligible member of the family (< 30 yrs. old) Not permitted

Federal Income Tax Treatment

Federal income tax-free (and in many cases state tax free) if used for qualified higher education expenses Federal income tax-free if used for K–12 and qualified higher education expenses AND fully withdrawn by the time beneficiary reaches age 30
 
Earnings and gains taxed to minor; first $1,000 of unearned income is tax exempt; unearned income over $2,100 for certain children through age 24 is taxed at parents' rate
Federal Estate Tax Treatment Value removed from donor's gross estate Value removed from donor's gross estate Value removed from donor's gross estate unless donor remains as custodian
Federal Gift Tax Treatment Contributions treated as completed gifts, subject to $15,000 annual exclusion, or up to $75,000 with 5-year accelerated election ($30,000/$150,000 respectively for spouses who gift split) Contributions treated as completed gifts; 2019 annual contribution limit is $2,000 Transfers treated as completed gifts, subject to $15,000 annual gift exclusion
Federal Financial Aid Counted as parental asset if parent is account owner, which is often more favorable. Not currently reported if dependent student is account owner Counted as asset of trustee or custodian, typically the parent
 
Counted as student's asset
State Tax Deduction1 Up to a $3,280 deduction from taxable income per eligible family member per year (if Wisconsin resident) No No
Penalties on Nonqualified Withdrawals Ordinary income taxes plus a 10% IRS penalty on earnings Ordinary income taxes plus a 10% IRS penalty on earnings None
Advantages
  • Federal and in many cases state tax advantages
  • Account can be transferred to another family member
  • Account owner retains control of how the money is used
  • Contributions may be made by anyone
  • No age restrictions on beneficiary
  • Allows the highest amount that can be contributed for estate or gift tax purposes
  • Federal and in some cases state tax advantages
  • Account can be transferred to another family member
  • Account owner retains control of how the money is used
  • Contributions may be made by anyone
  • May be used for elementary and secondary school expenses
  • No contribution restrictions
  • No family income restrictions
  • Contributions may be made by anyone
Disadvantages
  • 10% tax on non-qualified withdrawals
  • Can only change investments twice a year (or when beneficiary changes)
  • Can only be used tax-free for qualified higher education expenses
  • Not available for high income families
  • Maximum of $2,000 per year contribution
  • Can only contribute until child reaches 18
  • 10% tax on non-qualified withdrawals
  • Must be withdrawn before child reaches age 30
  • Student gains complete control at age of majority (or when trusteeship ends)
  • Limited tax-advantaged growth

Please note that the principal portion of any rollover contributions may qualify for reducing WI taxable income; the portion attributed to growth is not eligible.