FAQs: General Questions

Do I have to live in a state to participate in that state’s 529 College Savings Plan?
How does the Pension Protection Act affect the 529 College Savings Plan?
How do I make ongoing contributions to my Schwab 529 Plan?
How often I can change my investment selections?
Can I change the beneficiary on my 529 Plan?
How do I open a 529 plan account through Schwab?
What happens if my child decides not to go to college or can’t use all the funds?
How do I invest in a 529 plan?
What’s a prepaid program?
If I open up a 529 plan in a certain state, will my child need to go to a school in that state
Will a 529 plan affect my child’s ability to qualify for financial aid?
Can I transfer my child’s existing custodial account (UTMA/UGMA) into a 529 plan?
Can I invest in more than one state’s 529 plan?

Do I have to live in a state to participate in that state’s 529 College Savings Plan?
While all states offer some type of 529 plan, there’s no requirement that you pick your own state’s plan. It’s best to compare plans and their differences. For example, some state plans, such as California, do not currently offer income tax deductions for plan contributions. In this case, other state’s plans may have lower costs or more attractive investment features.

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How does the Pension Protection Act affect the 529 College Savings Plan?
With the passing of the tax law in August 2006, you pay no federal taxes on withdrawals used for qualified college education expenses, making a 529 an even smarter choice for savings. For more information, see Schwab Article Pension Bill Lifts 529 Cloud.

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How do I make ongoing contributions to my Schwab 529 Plan?
Schwab offers many convenient ways to make deposits to your 529 Plan. Most popular is our Automatic Monthly Investment service to setup recurring monthly deposits from a Schwab Account or account with other financial institutions. You can also use our MoneyLink® electronic funds transfer feature to make single or reoccurring transfers from a Schwab account to your Schwab 529 Plan. Forms for these services as well as other deposit forms can be found at Fund Your 529 Account.

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How often I can change my investment selections?
You can twice per calendar year in 2009 as authorized by the IRS. Find the Change of Investment form at Manage Your 529 Account.

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Can I change the beneficiary on my 529 Plan?
You can change the beneficiary on your account at any time. You may want to do this if the student does not attend college or if the student graduates and there is money left in the account. Find the Change of Beneficiary form at Manage Your 529 Account. Note that if the Schwab 529 plan account was opened with funds transferred from and Custodial or ESA account, the beneficiary of that account can not be changed at any time.

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How do I open a 529 plan account through Schwab?
There are two easy options for opening an account.

You can Open An Account online. To fund your account using the online enrollment process, you can set up an automatic investment from your bank account, or Schwab brokerage account.

You can also open an account by downloading the account application. To do so, simply download the Schwab 529 application.

Forward your completed application to:
Charles Schwab & Co., Inc.
P.O. Box 3368
Greenwood Village, CO 80155

If you need assistance completing the online enrollment form, call a Schwab 529 Specialist at 888-903-3863.

For more information, see how to open an account.

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What happens if my child decides not to go to college or can’t use all the funds?
You can either name a new beneficiary for the account or withdraw the funds. If you name a new beneficiary, he or she must be an eligible member of the current beneficiary’s family (e.g., brother, sister, cousin, etc.) to keep the tax benefits. Potential gift or federal generation-skipping taxes may also apply. If you choose to withdraw the funds from the account for non-qualified expenses, the earnings portion will be taxable and subject to a 10% federal penalty. If the beneficiary receives a Scholarship for Qualified Education Expenses, or should become disabled, you may request a penalty–free withdrawal. In these situations, the account may still be taxed on the earning portion of the withdrawals. Please consult with your tax advisor to discuss your individual situation.

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How do I invest in a 529 plan?
Schwab’s 529 Plan offers 10 different investment options—each carefully built on our asset allocation models and comprised of well-known mutual funds from multiple fund families to assure diversification across stocks, industry segments and investment styles.

You can choose between an age-based option, which automatically adjusts the asset allocation mix as the child nears college age, or you can choose a static portfolio that sticks with a particular investment strategy based on your goals and risk tolerance. See Investment Choices to learn more

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What’s a prepaid program?
There are two types of 529 plans: prepaid programs and savings programs. Prepaid plans are designed to cover in-state tuition costs. Some of these plans allow you to transfer the value of your account to private and out-of-state schools, although you may not get full value depending on the particular state. Most prepaid programs aren’t designed to cover the full expense of college tuition, room and board, and other expenses, so if you choose to open a prepaid plan, you may want to consider opening a 529 savings program, as well. Schwab offers 529 College Savings Plan.

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If I open up a 529 plan in a certain state, will my child need to go to a school in that state?
529 college savings plans are set up so that the full value of the account can be used at any accredited college or university in the U.S. However, certain 529 pre-paid plans may restrict using the funds out of the state. You can use funds from The Schwab 529 Plan in any state.

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Will a 529 plan affect my child’s ability to qualify for financial aid?
Guidance from the U.S. Department of Education says that a 529 plan is counted as an asset of the parent or other account owner in determining eligibility for federal financial aid. As a result, your maximum expected contribution from the 529 account will be 5.6% for each academic year. Assets held in the child’s name, such as with a custodial account, are assessed at 20%. You should speak with your tax advisor concerning your particular situation.

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Can I transfer my child’s existing custodial account (UTMA/UGMA) into a 529 plan?
Many 529 plans accept funds from existing custodial accounts. To do so, you need to cash out the custodial account, which could result in a taxable transaction. However, future earnings could accumulate on a tax-free basis. Because custodial assets belong to the child, it’s important to note that when transferring these funds, they will remain in the child’s name and the child will be considered the account owner. And when the child reaches the age of majority, he or she will have full control of the account, including contributions made after the transfer. There may be some restrictions on custodial transfers. For more information, see Transferring a Custodial Account to a 529 Plan: Can and Should You Transfer?

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Can I invest in more than one state’s 529 plan?
Yes. You may open up multiple state plans for your child, although, due to the high lifetime contribution limits of 529 plans, there’s little reason to have one through more than one or two states.

Before investing, carefully consider the plan's investment objectives, risks, charges and expenses. This information and more about the plans can be found in the Schwab 529 Guide and Participation Agreement available from Charles Schwab & Co., Inc., and should be read carefully before investing. If you are not a Kansas taxpayer, consider before investing whether your or the beneficiary's home state offers a 529 plan that provides its taxpayers with state tax and other benefits not available through this plan. As with any investment, it is possible to lose money by investing in this plan.

The Schwab 529 College Savings Plan is available through Charles Schwab & Co., Inc. and is managed by American Century Investment Management, Inc. The Plan was created by the Kansas State Legislature under the provisions of Section 529 of the Internal Revenue Code and is administered by Kansas State Treasurer Dennis McKinney. Notice: Accounts established under the Schwab 529 Plan and their earnings are neither insured nor guaranteed by the State of Kansas, the Kansas State Treasurer, American Century Investments or Charles Schwab & Co., Inc. Accounts established under the Schwab 529 Plan are domiciled at American Century Investments and not Schwab. American Century Investment Services, Inc., Distributor and Underwriter.

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