Control, flexibility and transferability
When you open an Ivy InvestEd 529 Plan account, you are the "owner" of the account for the benefit of your selected beneficiary, such as your child, grandchild, niece or nephew. So, if your selected beneficiary chooses not to go to college, you can simply transfer the account to another direct family member of the beneficiary or if you simply want to change the beneficiary you may. Also, any U.S. citizen or resident, including your friends or relatives, can contribute to an Ivy InvestEd 529 Plan, an education savings account.
High contribution limits, no income restrictions
With the Ivy InvestEd 529 Plan, you can make contributions, until a maximum balance of $453,000 (2017-2018 academic year) is reached for all Program accounts per beneficiary. Plus, there are no income restrictions on the account owner, so you'll remain eligible to maintain your Ivy InvestEd 529 Plan account regardless of your income.
Earnings in your Ivy InvestEd 529 Plan account grow federal income tax-deferred. And all withdrawals are federal income tax-free if they are applied to qualified higher education expenses, such as tuition, fees, room and board, and books. Please note that state and local taxes may apply. States may offer some tax breaks such as a deduction for contributions or income exemption on withdrawals. This information is based on current tax laws, regulations, rules and interpretations, which are subject to change at any time. Please consult your tax advisor regarding your individual circumstances.
The availability of tax or other benefits may be conditioned on meeting certain requirements, such as residency or purpose for or timing of distributions. Taxes are deferred until withdrawal. The earnings portion of a non-qualified withdrawal is subject to a 10% penalty as well as federal and/or state taxes.
Estate planning advantages
Especially important for grandparents or other relatives, contributions to an Ivy InvestEd 529 Plan account are excluded from the donor's taxable estate for federal tax purposes (assuming the donor is not the beneficiary). Thanks to the annual $14,000 gift tax exclusion ($28,000 in the case of a married couple), it is possible for grandparents, other relatives and friends to contribute substantial amounts to an account without incurring any gift tax. An election can be made (on the federal gift tax return) to spread up to $70,000 ($140,000 for married couples) to each beneficiary and spread the contribution over five years for gift tax purposes, as long as they do not make additional contributions to the same beneficiary during that five-year period. Please remember that if the contributor dies before the end of the five-year period, the portion of the gift allocable to the years remaining in the five-year period would be in the contributor's estate for federal estate tax purposes. Consult your CPA or other tax advisor regarding the impact of gift, estate, and other tax consequences.
It's easy to get started
You can open an Ivy InvestEd 529 Plan with as little as $250 per fund, and subsequent investments do not have a limit. You can also start with only $150 per fund and subsequently, a minimum of $50 per month, if you establish an automatic monthly investment or Automatic Investment Service (AIS). Additionally, if you establish an account through payroll deduction or salary deferrals, there are no account minimums. Periodic investment programs like AIS cannot guarantee a profit or protect against investment loss in a declining market.
Before investing, investors should carefully consider the investment objectives, risks, charges and expenses of the Ivy InvestEd 529 Plan. This and other information is found in the InvestEd Portfolios prospectus, and the Ivy Funds prospectus, the Ivy InvestEd 529 Plan Program Overview, and the InvestEd 529 Plan Account Application. All of these items are available from these links or from a financial advisor. Please read the prospectus carefully before investing.
Before investing, non-residents or tax-payers of states other than Arizona should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors than those offered under the Ivy InvestEdSM 529 Plan. Please consult your tax advisor regarding your personal tax situation.
The Ivy InvestEd 529 Plan and shares of InvestEd Portfolios are offered by Waddell & Reed, Inc. as part of the Arizona Family College Savings Program Trust Fund, a 529 plan administered by the Arizona Commission for Postsecondary Education (the “Program”). Waddell & Reed, Inc. is one of multiple financial Institutions eligible to offer Investments under the Program. Accounts a not insured by the State of Arizona, the Trust, the Arizona Commission for Postsecondary Education, or any other governmental entity, Waddell & Reed, Inc., Ivy Distributors, Inc., or any affiliated or related party, and neither the principal deposited nor the Investment return is guaranteed by any of the referenced parties.
Past performance is not a guarantee of future results. Investments into a 529 plan, including the Ivy InvestEd 529 Plan, are not guaranteed, and all investments involve a certain degree of risk. The value of your Ivy InvestEd 529 Plan account will depend upon the performance of the portfolios in which your account is invested and will fluctuate. It is possible that the value of your account may be less than the amount you invested.
The information provided may include references to concepts that have legal, accounting and tax implications. It is not to be construed as legal, accounting or tax advice, and is provided as general information to assist in the understanding the issues discussed. Neither Waddell & Reed, Inc. nor Ivy Distributors, Inc., nor their associates offer tax, legal, or accounting advice. You may want to consult with your accountant or tax advisor to discuss your personal situation. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon and risk tolerance.