529 Plan Comparison

A College Savings Trust gives parents a savings plan that is easier to manage, has far more security and provides much greater flexibility than 529 Plans.

Here is a quick comparison of a College Savings Trust vs 529 Plans.

Account Features:
College Trust
529 Plan
  • For residents of all US states & territories
  • Designed for college
  • No negative impact on grants or financial aid
  • Use funds for any accredited college in the country (or world)
  • Accommodates all educational needs
  • Use funds for all types of technical/trade education & licensing
  • Savings can be used for child’s welfare in the event of sickness or accidents
  • Unlimited contributions
  • Easy to open an account
  • Account can be opened while pregnant
  • Contributions made pre-tax (like an IRA)
  • Contributions made after-tax
  • Income & earnings tax waived/penalized
  • No tax penalties on income or earnings
  • Variety of compounding investment options
  • Grantor tax coverage
  • Easy for family & friends to contribute
  • Savings are protected from lawsuits, bankruptcy, divorce, etc
  • Allowable pre-college expenses include:
  • Private or charter school tuition
  • Books
  • Test prep (e.g. SAT, ACT, etc)
  • Tutoring
  • Travel for college tours
  • Travel & program fees for charity work and resume-building activities
  • Moving expenses to/from college
  • Summer living expenses
  • Allowable college expenses include:
  • Tuition
  • Books
  • Specialty lab fees
  • Lectures & special events
  • Internship related expenses
  • Computer
  • Other Equipment
  • Phone
  • Rent (student housing)
  • Rent (off campus)
  • Rent & dues (fraternity/sorority)
  • Social & sports dues & expenses
  • Transportation
  • Health insurance
  • Electives (semester abroad, etc)
  • Tutoring
  • Grad-School test preparation
  • Post college:
  • Account may remain open
  • Remaining savings are protected from lawsuits, bankruptcy, divorce, etc.,
  • Funds can be used for living expenses
  • Funds are protected & professionally managed until age of ascension
College Savings Trust

Free Download

Click on the button below to download our "College Trust vs 529 Plan" brochure. This brochure compares the features and benefits of the College Savings Trust versus the 529 Plan.

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Frequently Asked Questions

What does it cost?

Often, for both 529's and College Trusts, there are no set-up fees, no annual fees, and no trust filing fees. However, there are things going on behind the scenes, as nobody can really work for free. These include...

  • 529's have lot of fees, almost entirely hidden. E.g. the state sponsoring the plan gets 25bps. The broker (if one) might get 100bps. An investment adviser might get 25 - 150bps The fund manager usually gets 75 - 225bps. The fund administrator gets 10 - 35bps. The fund accountant gets a fee. Brokers, clearing firms who execute trades for a fund get fees. Custodians who hold assets get fees. Etc.
  • College Trusts have far fewer expenses than 529's (e.g. we don't have to pay a state sponsor, nor are their any brokerage or advisory fees) We make money by managing the various portfolios that the trusts invest in (e.g. Government Securities, Corporate Bonds, ETF's, Real Estate), which runs from 100bps to over 200bps (on the work-intensive real estate portfolio), and we pay a fund administrator and accountant nominal annual fees. The only time "regular" trust fees would apply is if you contribute assets other than cash to your college savings trust (e.g. real estate, private business ownership interests, publicly traded stocks or bonds, etc); which are all permissible in a trust, but not in a 529, though they do take a more work on our end to manage.

note: effective March 29th, 2018 we are no longer investing trust assets in ETF's and have liquidated all trust positions. This is due to market uncertainty and our belief that the stock and bond markets are starting a potentially long-term downward cycle, combined with our primary focus and desire to protect the savings and assets of our customers. That said, if you really want stock or bond market investments then we can certainly do that, just call us to discuss it.

Can I rollover my 529 plan to a college trust?

Yes! You can withdraw your principal assets (meaning, the contributions you have made to the 529 plan) and send them to your college trust. The accumulated earnings in your 529, if any, should be left in the 529 in order to avoid tax penalties (there are no tax issues or penalties for withdrawing principal).

Impact on grants, loans and financial aid?

A College Trust has zero adverse effect on applications. On the other hand, 529 Plans, Coverdell account and UGMA/UTMA accounts can have a serious negative impact on your child’s application for grants, loans and other financial aid.

"Sound complicated? It is. And we are only talking about the federal financial aid rules here -- each school can (and most will) set its own rules when handing out its own need-based scholarships, and many schools are starting to adjust awards when they discover 529 accounts in the family."

Read entire article: Plan for college - Edvisors.com

"...any withdrawals (from a 529 Plan) used to pay for their college will be counted as untaxed income on the FAFSA. Let's say a grandmother wants to cover a full year of her grandson's tuition at a private college, which costs $45,000. He'll be a freshman in 2017, and he plans on applying for financial aid every year. On his first and second FAFSA, he'll have nothing to report, but when he applies for federal aid for the 2019-20 school year (when he's required to report prior-prior year income) his untaxed student income that was generated from Grandma's gift may reduce his aid package by as much as $22,500 – Yikes!"

Read entire article: Yes your 529 plan will affect financial aid - SavingForCollege.com

Are there limits on contributions?

There are unlimited contributions as there are no tax penalties on college trust accounts in the event that the savings account is overfunded, or if they don't attend college and instead pursue other paths in life. This account has no limits, other than as prescribed by IRS rules (e.g. the $5,000,000 lifetime exemption). 529 Plans, on the other hand, have severe penalties if the account is "over funded" or if not used for exact, limited IRS-approved college expenses.

Can the funds be used for other types of education?

Not every child winds up going to college. Many people find fulfilling, well-paying careers and lives in various trades or professional services that may require a license or certificate, but not a college degree. These include computer programming, construction, nursing, teaching, social services, and so much more. The college savings trust can assist with all of these while a 529 plan cannot.

Are post college funds professionally managed until age of ascension?

New graduates are often tempted to make some poor life choices when it comes to use of funds. Excessive travel or partying, purchasing expensive cars or other depreciating, illiquid assets, and poor business investments are all too common for 21-year-old kids with funds sitting in trust. Except with a college savings trust, the parents (grantors) continue to review and confirm or deny every expense request and the Trustee professionally manages the funds the trust as fiduciary. This continues until the age of ascension, usually 30 but may be whatever you set when you opened the account, at which time the trust can be liquidated if desired. Until then, funds cannot be wasted. Used to help buy a new home? Absolutely. Rent and living expenses? Yes, within reason. Cover medical and health issues? Definitely. Travel? Some, within reason. Starting a business or opening a practice? Sure, depending upon the circumstances (e.g. a newly graduated dentist purchasing a practice from a retiring dentist would likely be fine, a newly graduated communications major who wants to open a ski school in Orlando would be suspect).

What do I need to know about taxes?

Unlike an IRA, funds going into a college savings account are via after-tax dollars, not pre-tax (this is true regardless of whether it’s a trust or a 529 Plan). Taxes on investment income and realized capital gains may, or may not, be waived in a 529 Plan. For a 529 Plan to work you need to be 100% sure that your child will wind up going to an accredited college, 100% sure that the tuition and other IRS-approved expenses will be more (not less) than you saved, and 100% sure that you will never, ever need funds for healthcare, phone, travel, tutoring, or any other expenses that are not on the approved short-list. Otherwise you’ll pay not just income taxes but also a 10% penalty on those funds. Even if you do plan perfectly, the inflexibility, lack of asset protection and potential negative impact on grants and financial aid make 529 Plans less than ideal. With a College Savings Trust there are no such restrictions or tax penalties.

What about opening an account while pregnant?

A college trust allows you to open an account the moment you get the wonderful news, enabling you to update the child's name once he or she is born. This lets you get a jump on savings, and can provide more meaningful baby showers and congratulations gifts with contributions to the College Savings Trust instead of yet another cute outfit or stuffed toy. 529 plans do not allow this and require that the baby be born AND have a social security number before an account can be opened.

Are savings protected from lawsuits, bankruptcy, divorce, and other life events?

Yes, really. That's one of the key benefits of a trust instead of a 529 or any other type of savings plan...savings in the trusts are protected by law, held for the benefit of the beneficiary and not attachable to judgements or claims. You can read more in our Trust FAQs.

Still have questions? Check out our FAQs page

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Opening a new College Savings Trust is easy and takes just 5 minutes. Simply click the button below and start saving for your child’s future today!

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