Smart529 Select

FAQ


General Information
q.
Is SMART529 Select a "Qualified Tuition Program?"
a.

Yes, and therefore it has special tax advantages unavailable in other savings vehicles. For example, with SMART529 Select, withdrawals for qualified higher education expenses (tuition, fees, room, board, books, equipment and supplies required for attendance according to the IRS guidelines) are free from federal income tax.  Non-qualified withdrawals are taxable as ordinary income to the extent of earnings, and may also be subject to a 10% federal tax penalty. Such withdrawals may have state income tax implications.

q.
What are the eligibility requirements for participation?
a.

An account owner can be any adult U.S. resident or citizen, a business or a non-profit organization. Your designated beneficiary can be a U.S. citizen or resident of any age. You can even open an account for yourself.

q.
How much does it take to open a SMART529 Select account?
a.

SMART529 Select’s low initial minimum investment requirement makes it accessible to just about any household budget. It only takes $250 per investment option to open an account, and additional contributions can be as little as $25 per option.  (The annual maintenance fee is waived if you are enrolled in the Automatic Investment Program for $50 or more, and on account balances over $25,000).

q.
Who controls the account?
a.

The account owner has complete control of withdrawals and other changes to the account.

q.
At what colleges and trade schools can I use my SMART529 Select assets?
a.

Most two or four year accredited colleges, universities, vocational, technical and graduate schools in the U.S., as well as a limited number overseas are eligible. To check if a U.S. institution is accredited, call the Federal Student Financial Aid Center at 1-800-433-3243.

q.
What happens if the child receives a scholarship?
a.

If the beneficiary receives a grant or scholarship that is used to pay qualified higher education expenses, you may withdraw that amount from your SMART529 Select account without a federal income tax penalty. If the money is not used for other qualified higher education expenses, the earnings portion of the withdrawal will be subject to ordinary income taxes but will not incur a penalty. Proper documentation of the grant or scholarship may be required.

q.
What are the options if my child doesn't attend college or if the money saved is not needed for college expenses?
a.

As account owner you have three options: (1) Leave the money in the account, in case the beneficiary decides to attend school later; (2) Change the beneficiary to an eligible family member of the current beneficiary; or (3) Withdraw the money. In the event of a withdrawal, earnings will be subject to ordinary income taxes and possibly a 10% federal income tax penalty. Such a withdrawal may have state income tax implications.

q.
What if the beneficiary dies or becomes disabled and does not attend college?
a.

If the beneficiary dies or becomes disabled, you have two options: (1) change the beneficiary on the account to another eligible family member, or (2) withdraw the money, which would be subject to ordinary income tax on earnings but no federal tax penalty.1

1Please see the SMART529 Select College Savings Offering StatementPDF for a definition of Eligible Beneficiary.

q.
Can I transfer my UGMA/UTMA account to a SMART529 Select account?
a.

You should consider the following before you transfer from an a UGMA/UTMA account to SMART529 Select: 

  • Since UGMA/UTMA accounts are owned by the beneficiary, the SMART529 Select account must be opened with the child named as both account owner and designated beneficiary.
  • The transfer may be a taxable transaction that would need to be reported, but future earnings would grow tax-deferred in the SMART529 Select account.
  • An account with a child as account owner can only be funded with the proceeds of the UGMA/UTMA account and cannot be funded with a check written by a parent or other individual.  Only money that is already in the child's name can be invested in the account.  

To manage any potential problems, the money rolled over from your UGMA/UTMA account will be put into a new SMART529 Select account.  This account will be closed to new contributions.  You may then open another SMART529 Select account for the designated beneficiary without any concerns about whether the contributions come from investments that are in the designated beneficiary's name.

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Eligible Expenses
q.
What college expenses can I save for with SMART529 Select?
a.

Qualifying expenses include tuition, fees, room, board, books, equipment and supplies required for attendance according to the IRS guidelines. The amount of a qualified expense may be limited by federal statute or IRS regulation (see the SMART529 Select College Savings Offering Statement PDF for more information).

q.
Are there college expenses that I cannot use SMART529 Select assets for?
a.

A few, such as travel and transportation, personal expenses, entertainment and equipment that is not specifically required for college attendance.

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Taxes
q.
What are the federal tax advantages?
a.

Earnings in your account have the potential to accumulate tax-deferred until withdrawn. Qualified distributions are not subject to federal income tax. (For a non-qualified distribution, the earnings portion is taxable to the individual who receives the payment, either the account owner or the designated beneficiary.  If the payment is not made to the beneficiary or to an eligible educational institution for the benefit of the beneficiary, it will be deemed to have been made to the account owner.)

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Account Information
q.
Can I change the Beneficiary?
a.

Yes. Beneficiary changes are unlimited and income tax free if made to an eligible family member of the current beneficiary (see the Offering Statement PDF for details).

q.
How do I make changes to my account?
a.

Download, complete and submit the appropriate form under Forms & Documents. You may also contact the SMART529 Service Center toll-free at (866) 574-3542 to request a form.

q.
Can I change my investment option (investment strategy)?
a.

Account owners may make one investment strategy change per year.

q.
Can I access my account online?
a.

Yes, you can access your secure account whenever you want.

q.
How do I make additional contributions to my account?
a.

Simply make your check payable to SMART529, write your beneficiary number (which can be found on your statement) on your check and send it to:
SMART529 Select
P.O. Box 55371
Boston, MA 02205

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Distributions
q.
How do I withdraw money from the account?
a.

There are three ways to take a distribution:

  1. Log in image, go to Investment Managment, and select Distributions.
  2. Complete the  Distribution Request Form image and return it to the address on the form.
  3. Call the SMART529 Service Center and make the request over the phone. Only qualified distributions may be made over the phone.
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Opening an Account
q.
How do I enroll?
a.

You can open an account in SMART529 Select online on this website by completing the information. You can also request a printed enrollment kit be mailed to you.  If you reside in or have taxable income in a state other than West Virginia, you should consider whether your state has a qualified tuition program that offers favorable state income tax or other benefits exclusive to your state’s program that are not available under the SMART529 Select program.  Taxpayers and residents of other states who are interested in exploring such tax consequences should consult with a qualified tax advisor.

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Contributions
q.
What’s the most that can be contributed per Designated Beneficiary?
a.

You can contribute as much as you like to your SMART529 Select account until the total account balance of all SMART529 Program accounts for that single beneficiary reaches $265,620, at which point no further contributions can be made.1

q.
What is the minimum contribution per Designated Beneficiary?
a.

Once you’ve established an account, the minimum subsequent contribution is $25.00.

1For more information about the aggregate amount that can be invested for any Designated Beneficiary, please see the SMART529 Select College Savings Offering StatementPDF.

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Updated 08/27/2013