Beyond being a robust college savings vehicle, a 529 Plan can be incorporated into various tax and income planning strategies. Plan features like the credit card and dollar cost averaging within the plan also may help you make the most of your 529 Plan.
Gifting and Estate Planning with a 529 Plan
Investing in the Fidelity Advisor 529 Plan could help reduce your income tax liability, minimize estate taxes, and potentially leave a larger legacy.
College Saving Strategies for Wealthy Investors [PDF]
UGMA/UTMA Transfers
There may be tax benefits associated with converting a poorly performing UGMA/UTMA to an UGMA/UTMA 529 Plan. In addition, the federal tax advantages of an UGMA/UTMA 529 Plan may outweigh the tax liability on any realized earnings of an UGMA/UTMA.
Prior to transferring assets from an UGMA/UTMA to an UGMA/UTMA 529 Plan account, you must liquidate to cash the UGMA/UTMA assets and pay all applicable taxes. Please consult a tax professional regarding your specific situation prior to liquidating your UGMA/UTMA account.
What's more, an UGMA/UTMA account may be large enough that its yearly earnings amount to $1,600 (the threshold that triggers the "kiddie tax"). Assets growing within an UGMA/UTMA 529 Plan have the potential to grow tax deferred and therefore will not trigger a yearly "kiddie tax."
"Kiddie Tax" is the nickname given to income taxes paid at the parent's tax rate on earnings in an UGMA/UTMA account. Once the child reaches age 14, all earnings in the UGMA/UTMA account are taxed at the child's tax rate.
UGMA/UTMA Transfers [PDF]
Rollovers
If you are unhappy with your current 529 Plan for any reason, talk to your advisor about rolling over to the Fidelity Advisor 529 Plan.
* Under federal tax laws, only one 529 account for a beneficiary can be rolled over in any 12-month period without changing the beneficiary.
Dollar Cost Averaging
Dollar cost averaging within a tax-deferred Fidelity Advisor 529 Plan can help you jump-start your college saving. The strategy also provides short- and long-term estate and tax planning advantages.
Dollar cost averaging does not ensure a profit or protect against a loss in declining markets. Since dollar cost averaging involves continuous investment in securities regardless of their changing price levels, you should consider your financial ability to continue your purchases through down markets.
Fidelity Investments 529 College RewardsSM Credit Card
You can use the credit card to help fund a loved one's education.
Apply Online or call your advisor for details.
Earn rate and points limit may be subject to change. Currently, cardholders are limited to 1,500 points per rolling 12 months based on the anniversary of the date on which the card was first used. Other restrictions apply. Full details are provided in the Program Guidelines documents. For rate, fee, and other cost information, and to learn more about the benefits of the Fidelity Investments 529 College Rewards program, please refer to the online credit card application at advisor.fidelity.com or call 800-433-0480. This credit card program is issued and administered by MBNA America Bank, N.A., which is not an affiliate of Fidelity Investments and does not offer, manage, or guarantee any of the 529 Plans managed by Fidelity Investments. The information or material describing this credit card program is neither a solicitation nor a recommendation by any distributor of the Fidelity Advisor 529 Plan. The card is made available by MBNA America Bank, N.A., directly to participants in the Fidelity Advisor 529 Plan program.
The points earned assume that all eligible retail purchases are made with the Fidelity Investments 529 College Rewards Card and that the Card is linked to an open, funded, and designated Fidelity-managed 529 Plan account. Cardholders currently earn two (2) Points for every $100 in eligible new net retail purchase transactions charged to the Card. If there is a balance of at least 50 Points at the closing date of the last billing statement during a calendar quarter, then at the end of the quarter the Points will become Fidelity 529 Dollars. Each Point transferred becomes one Fidelity 529 Dollar. Other restrictions apply. Full details are provided in the Program Guidelines documents.
The Fidelity Advisor 529 Plan is offered by the State of New Hampshire and managed by Fidelity Investments. If you or the designated beneficiary are not a New Hampshire resident, you may want to consider, before investing, whether your or the designated beneficiary's home state offers its residents a plan with alternate state tax advantages or other benefits.
Units of the Portfolios are municipal securities and may be subject to market volatility and fluctuation.
Please carefully consider the Plans' investment objectives, risks, charges, and expenses before investing. For this and other information on the Fidelity Advisor 529 Plan, call or write to Fidelity or visit advisor.fidelity.com for a free Offering Statement. Read it carefully before you invest or send money.
The estate planning information herein is general in nature and should not be considered legal or tax advice. Fidelity does not provide legal or tax advice. Laws of a particular state or a particular situation may affect this information. Consult with an attorney or tax professional regarding any specific legal or tax situation.