Expand your practice with 529 education savings plans
For many financial professionals, education savings represents an untapped practice-building opportunity. Learn how successful financial professionals cultivate client interest, build a bigger client base and increase assets under management.
Consider the ways that helping clients with an education savings strategy can also benefit your practice
Advisor benefits include:
- Deeper client relationships. Investors consistently rank college savings as one of their most important objectives. Addressing this and other investment needs can help you fulfill client expectations for more comprehensive, personalized planning.
- Sizable investments. Financial professionals often think 529 savings plans only involve small account balances, but in reality high contribution limits coupled with tax benefits may make 529 plans a potentially attractive estate-planning vehicle for high-net-worth clients, such as grandparents. (Tax-advantaged treatment applies to savings used for qualified education expenses. State tax treatment varies.)
- Administrative ease. Options such as age-based target date funds and payroll deduction for employer-sponsored plans clear administrative and logistical hurdles so it’s easy to set up new accounts.
- The advantages of CollegeAmerica. The country’s largest plan features a number of meaningful benefits, including fees that are among the lowest for advisor-sold 529 college savings plans.*
- Available in all 50 states and the District of Columbia.
Resources to use:
CollegeAmerica 529 Savings Plan — Learn more about the CollegeAmerica plan.
CollegeAmerica brochure (PDF), CollegeAmerica | Quarterly Statistical Update — Provide clients an overview of CollegeAmerica benefits.
CollegeAmerica Account Forms and Guidelines — Learn how to set up and service CollegeAmerica accounts.
Lay out your strategy for growing your 529 business
- Make 529 part of your routine. Discuss college planning with all new clients and integrate college savings and/or gifting into your year-end tax discussions.
- Engage emotions. Explain to clients how getting started early and reducing the student-loan burden can make a huge difference in the lives of their children or grandchildren. (For distributions made after December 31, 2018, qualified education expenses includes amounts paid as principal or interest (up to a $10,000 lifetime maximum) on any qualified student loans of a designated beneficiary or the designated beneficiary's sibling.)
- Tie in education savings with holiday gifting. As holidays approach, suggest that clients contribute a meaningful gift to a loved one’s 529 savings account. Also, May 29 (5/29) is National 529 College Savings Day! Celebrate with an event on the importance of setting aside money for higher education.
- Bring the conversation outside the office. Give clients a college savings piggy bank after the birth of a child or grandchild. Suggest they earmark all deposits for a CollegeAmerica account.
- Meet with receptive audiences. Attend a PTA meeting or back-to-school event to provide informational material to parents, school board members and educational professionals.
- Build a network. Create a network of CPAs and estate attorneys to cover the full spectrum of 529 issues, including tax benefits and student loans. Also consider holding education planning client events for people in similar age groups (new parents, empty nesters/grandparents, estate planners).
- Prospect local businesses. Find local small-business owners through small business directories, the local chambers of commerce, through business license applications or just by driving around town.
Reach multigenerational prospects and promote the estate-planning benefits of 529 plans
Make college savings a family affair by reaching out to grandparents and other family members to contribute. Explain how they may also be able to take advantage of estate planning benefits associated with 529 savings plans:
- High gifting limits can help put money to work. Investments have the most potential to benefit the beneficiary when they have the longest possible investment timeframe. Thanks to CollegeAmerica’s high gifting limits, contributors are able to put sizable assets to work.
- Tax-free wealth transfers remove the tax burden, not the control. You can make sizable lump-sum investments or transfer significant assets out of an estate, including up to $15,000 ($30,000 for married couples) annually per beneficiary without gift tax consequences. Under a special election, you can also invest up to $75,000 ($150,000 for married couples) at one time by accelerating five years’ worth of investments. For gift-tax purposes, the assets are considered completed gifts, but the grandparents — provided they own the accounts — control the assets and the withdrawals.
No additional gifts can be made to that beneficiary over the next four years after the year in which the one-time gift is made. If the donor of an accelerated gift dies within the five-year period, a portion of the transferred amount will be included in the donor’s estate for tax purposes. Consult with a tax advisor regarding your specific situation.
- There’s no limit on the number of beneficiaries. The number of beneficiaries for whom they can make gifts is unlimited. Eligible contributions are deducted from their estate, but the account owner retains control of the assets as well as the withdrawals.
If withdrawals from 529 plans are used for purposes other than qualified education expenses, the earnings will be subject to 10% federal tax penalty in addition to federal and, if applicable, state income tax. States take different approaches to the income tax treatment of withdrawals. For example, withdrawals for K-12 expenses may not be exempt from state tax in certain states. Please consult your tax advisor for state-specific details.
Connect businesses with CollegeAmerica
- Identify companies that are potential 529 clients.
- Consider small- and medium-sized companies, which are often overlooked but represent a meaningful opportunity. The automatic contributions for multiple employees can add up quickly.
- Explain how 529 savings plans are a win-win to employers and employees:
- No setup costs. There are no account setup or maintenance costs incurred.
- Minimal administration. Employees manage their accounts directly with your plan's financial professional.
- No minimum participation. While widespread employee participation is welcome, a single shareholder is enough.
- No upfront sales charge for participants and low ongoing expenses with 529-E shares (available only in employer-sponsored programs).
*Source: 529 College Savings Quarterly Fee Analysis, ISS Market Intelligence, Fourth Quarter 2020. CollegeAmerica’s fees were in the top third of 31 national advisor-sold 529 plans and the top quartile of 24 national fee-based, advisor-sold 529 plans based on the average annual asset-based fees. Largest by assets, according to the 4Q 2020 529 College Savings Quarterly Data Update from ISS Market Intelligence. As of December 31, 2020, CollegeAmerica’s AUM is $81.9B.