We have compiled the information below from current and former CBA parents to share with anyone considering using their 529 College Savings Plan to pay for tuition at CBA.
Do you have a 529 College Savings Plan for your child? If so, you need to know about a compelling and fairly new component of your 529 plan that can benefit your family before college!
From the Future Scholar website: www.futurescholar.com:
“Effective January 1, 2018, families may withdraw up to an aggregate of $10,000 a year per beneficiary tax free to cover K-12 tuition at public, private or religious elementary or secondary schools. For such expenses, account owners are responsible for monitoring, and complying with, the $10,000 aggregate limit. There is not a distinction between K-12 withdrawals and withdrawals to a college or university. Withdrawals are simply qualified or non-qualified. K-12 withdrawals are made in the same manner as any other withdrawal from a 529 account: Online access through our web portal, via form or through our call center.”
Sara and Chandler Todd Disclaimer: This is our basic understanding of the process, so check with your personal financial advisor for the most current information!
My husband and I first learned about this opportunity last summer, and we reached out to a financial advisor to learn more before the start of the 2018-2019 school year. Since we already had 529 plans in place for our children through South Carolina’s Future Scholar program our decision to use these funds for current tuition and school-related expenses was an easy one. If you do not currently have a plan for your child, enrollment can begin online or with a mailed enrollment kit from www.futurescholar.com. This withdrawal benefit is available beginning in Kindergarten only so if your child is currently in preschool, now is a great time to start investing your future tuition!
Withdrawals for K-12 tuition and approved expenses can be made as frequently as needed or in one or two large amounts, depending on your preference. There are 3 ways to make a withdrawal: 1) directly to the institution 2) directly to the owner or 3) directly to the beneficiary (the child). We chose to have the money withdrawn directly to us as the owners (they even offer free overnight delivery), and we then deposited the check into our local bank to write a check to CBA. **We chose this method since we were new to the process, and we were unsure how smoothly it would go as a withdrawal directly to the school. All that being said it was honestly an easy process, and we are thrilled to be able to use our 529 plan now!
**Considering opening a 529 Plan?
Here is the summary of South Carolina’s Future Scholar Program’s tax benefits:
“Money in your account grows free from federal and South Carolina state income taxes. Withdrawals are also tax-free as long as that money is used for qualified expenses.
-If you file a South Carolina tax return, either as a resident or a non-resident, you may be eligible for additional tax advantages.
-Future Scholar account contributions may be tax-deductible, up to the maximum account balance limit of $500,000 per beneficiary (or any lower limit under applicable law). When you withdraw money to pay for qualified expenses, you pay no South Carolina state income tax on your withdrawals.”
-Future Scholar website: www.futurescholar.com**
The withdrawal form is available online under the Resources Forms tab (https://futurescholar.com/media/1237/ct-fsd_246982_withdrawal-request-form.pdf)
CBA parent Cody Stipkala provides these tips:
****It takes about a month and half to process the first payment.
-Enroll online or by mail using the “owner” and “beneficiary” applications.
-Set up the accounts on the 529 website.
-Transfer money to 529.
-There is a mandatory 10-day wait.
-Call 529 to request withdraw to CBA (The first time, you must fax or mail in the written instructions.)
-It takes 2 weeks for processing and mailing before it arrives to CBA. ***Have 529 schedule payment to be withdrawn no later than the 20th of each month to allow for snail mail.
So, for the July 1st tuition payment, parents need to be putting the money in the account NOW if they have not already!
The other thing that has helped us out is to set up a “bank deposit” account under each beneficiary for CBA tuition payments SEPARATE from the “growth portfolios” that we use for investing/saving for college. This allows us to not be dependent on the whims on the market and to more easily track that we stay below the $10,000 per year withdrawal limit.
