What makes the Brighter Future Advisor Plan a great choice?

The Brighter Future Advisor Plan raises the bar on education savings plans by offering the flexibility, low cost, diversification, and transparency you've come to expect from a world leader in Exchange Traded Funds.1

There's no better way to deepen relationships with your clients than to help them address their top priorities, including a child's college education. You and your clients can work together to plan for the next generation, as well as leverage the Brighter Future Advisor Plan for smart tax, gifting, and estate planning advantages.

Flexibility

Choose from a wide range of portfolio options to design an investment strategy that best fits each client's college savings goals.

Low Cost

The Brighter Future Advisor Plan features portfolios that invest in low-cost iShares® ETFs.

Diversification

Manage client risk by providing diversified exposure to a specific asset class or sector.

Transparency

Clients will know exactly what investments they own in their 529 plan - and how much they are paying.

529 Plan Tax Advantages

Tax Deferred Growth

Clients pay no taxes on account earnings while the assets remain invested in the Brighter Future Advisor Plan account.

Tax Free Withdrawals

Withdrawals are tax-free when used for qualified higher-education expenses at eligible educational institutions.2

Possible Arkansas Taxpayer State Income Tax Deduction

For taxpayers of Arkansas, contributions to the Brighter Future Advisor Plan (offered through the state of Arkansas), in a tax year are deductible from Arkansas state income tax, up to $5,000 for individuals (up to $10,000 for married couples making a proper election).3

Smart Gifting & Estate Tax Advantages

Parents or grandparents gifting to family members may receive an immediate benefit in reducing their gross estate, as donors. In addition, the Brighter Future Advisor Plan's high contribution limits (up to $500,000 per Beneficiary)4 provide a convenient way to effectively lower the value of your client's taxable estate.

  • Donors may contribute up to $16,000 per Beneficiary each year (up to $32,000 for married couples making a proper election) without gift-tax consequences.
  • Donors may choose a special election that allows them to make a contribution of up to $80,000 per Beneficiary ($160,000 for married couples making a proper election) gift-tax free as long as there are no further gifts in the same five-year period covered by the election.5
  • If the donor is also the Account Owner, they retain control over assets in the Brighter Future Advisor Plan account - even after removing the assets from their estate.

Qualified Expenses

Brighter Future Advisor Plan account savings can be used at any eligible public or private college/university, undergraduate or graduate program, qualified K-12 expense (up to $10,000 per year/student), eligible vocational school or trade school, or any apprenticeship that is registered and certified with the Secretary of Labor.

Qualified higher-education expenses include tuition, fees, books, supplies, and equipment, including computers, certain peripheral equipment, internet access, related services, and computer software, if the items are to be used primarily by the student during enrollment or attendance at any eligible postsecondary school in the United States or abroad; certain room and board expenses during academic periods in which the beneficiary is enrolled at least half-time; and certain expenses for students with special needs. Qualified expenses also include K–12 tuition of up to $10,000 per student per year in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.

Qualified education expenses also include fees, books, supplies, and equipment for certain apprenticeship programs and principal and interest on qualified student loan repayment expenses limited up to $10,000 lifetime per individual, for the beneficiary or a sibling of the beneficiary.6

UGMA/UTMA

Many families set aside college savings in UGMA (Uniform Gift to Minors Act) or UTMA (Uniform Transfer to Minors Act) accounts. Investments in UGMA/UTMA accounts belong to the child who will retain control of the account upon reaching the age of majority. In addition, UGMA/UTMA accounts are taxable accounts and do not benefit from a tax-deferred or tax-free status. In addition, UGMA/UTMA accounts will be considered assets of the student, not the parent, which may impact the student's access to financial aid.

College Savings Comparison

Compare Features: Brighter Future 529 Plan Coverdell UGMA/UTMA
There are no income limitations for the Account Owner Checkmark Income limitations apply* Checkmark
Federal tax-free growth Checkmark Checkmark Income & tax capital gains taxed to minor**
Ability to change beneficiaries Checkmark Checkmark No
Account Owner control withdrawals Checkmark Checkmark Transfers to child when child reaches age of maturity
State tax deductible contributions Checkmark No No
Tax-free qualified withdrawals Checkmark Checkmark Income and capital gains taxed to minor**
Federal financial aid impact Counted as asset of parent if parent is Account Owner; not reported if dependent student is Account Owner Counted as asset of parent if parent is account holder; minimal impact if dependent student is Account Owner Counted as student's asset
Investment options Ready-made portfolios of securities Wide range of securities Wide range of securities
Federal gift-tax treatment Can elect to apply up to five years of annual gift-tax exclusion allowances in a single lump sum contribution (up to $80,000 individually or $160,000 for married couples making a proper election) in a single year per Beneficiary*** Contributions may be treated as completed gifts up to a maximum of $2,000 Can contribute $14,000 each year ($28,000 for married couples making a proper election) without gift-tax consequences
Maximum investment per Beneficiary Maximum contribution limit of $500,000 $2,000 per Beneficiary per year No limit

Information as of 03/2017. Information subject to change.

*AGI limits: $190,000 and $220,000 (joint filers) or $95,000 and $110,000 (single filers).

**First $1,000 of unearned income is tax-exempt; unearned income over $2,000 for minors below age 18 taxed at parents' rate.

***All contributions in excess of $16,000/giftee are pro-rated over a 5-year period for the purposes of accelerated gifting. If the Account Owner chooses to use the 5-year election and dies before the end of the 5-year period, the portion of the contribution allocable to the calendar years remaining (beginning with the calendar year after the Account Owner's death) would be included the Account Owner's estate.

Mythbusting 529 Plans

There are many misconceptions about 529 plans. Get the facts about education savings plans with our most frequently asked questions.

Fact: There are no restrictions or requirements mandating the use of a 529 plan in the state in which an Account Owner or Beneficiary resides. However, before investing in any 529 plan, you should consider whether your or the Beneficiary's home state offers a 529 plan that provides its taxpayers with state tax and/or other benefits that are only available through the home state's plan.

Arkansas taxpayers can deduct contributions up to $5,000 (up to $10,000 for married couples making a proper election) per beneficiary per year from their taxable income, and earnings are not subject to AR state income tax.7

Fact: The money in your 529 plan account may be used at any eligible educational institution in the United States and abroad that qualifies under federal guidelines, including most public and private colleges and universities, graduate and postgraduate schools, community colleges, certain trade and vocational schools, and qualified apprenticeship programs.

While Arkansas recognizes tuition at K-12 public, K-12 private, and K-12 religious schools as a qualified expense for Arkansas taxpayers, other states may not. Please check with the state in which you reside to see if they have adopted federal guidelines surrounding K-12 tuition.

Fact: There are no income limitations for a 529 plan. Contribution funding limits vary and are established on a per-state plan basis. In fact, "Accelerated Gifting" allows the Account Owner to elect to apply up to five years of annual gift-tax exclusion allowances in a single lump-sum contribution (up to $80,000 individually or $160,000 for married couples making a proper election) in a single year per beneficiary without incurring a gift-tax.8

Fact: Unlike other college savings options, a 529 plan Account Owner controls the account. That means you can change the Beneficiary to another eligible "member of the family" (as per plan rules) with no tax penalty.9 Assets in a 529 plan account can grow in perpetuity; there are generally no time or age limitations on the use or distribution of plan assets.10 The Account Owner can also use the funds for his/her own higher education expenses as well.

Fact: There is no maximum age for a 529 plan Beneficiary. Considering career retraining? You can be your own account's Beneficiary, or you can become your own account's Beneficiary, providing you are an eligible "member of the family" (related to the original Beneficiary per the plan rules). As long as your school is eligible to receive federal student aid and is listed in the FAFSA (Free Application for Federal Student Aid) database, you can use your 529 plan assets - even if you are not attending full-time.

Fact: You can use your 529 savings plan account to pay for many qualified higher-education expenses, including tuition, fees, room & board, and any supplies required by the school.

Fact: 529 Plan assets have a relatively small effect on federal financial aid eligibility because they are considered assets of the Account Owner (vs. the Beneficiary) on the FAFSA (Free Application for Federal Student Aid) and will be factored into the EFC (Expected Family Contribution) at a rate of 5.6%, just like any other parental asset if the Account Owner is the parent of the student. You should consult a tax advisor for more information specific to your situation. Visit https://studentaid.gov/ for more information.

Fact: If the beneficiary receives a scholarship, 529 plan assets - up to the amount of the scholarship - can be returned to the Account Owner with the customary 10% penalty on non-qualified withdrawals waived. However, any earning will be subject to federal income tax, and possible state and/or local income tax.11

Fact: Funds deposited into a custodial account are irrevocable. The minor owns the money as soon as it goes into the account, and upon reaching the age of majority (usually 18 or 21, depending on the state), they will assume sole ownership of the account. Further, student ownership of the account may have an adverse effect on financial aid, as custodial assets are considered student assets, which will be factored into FAFSA's (Free Application for Federal Student Aid) EFC (Expected Family Contribution) at a rate of 20%. Investment income from custodial accounts is also subject to income limits of the "Kiddie Tax," which has increased effectively to age 24.12

For a comparison between 529 college savings plans, Coverdell accounts, and custodial (UGMA/UTMA) accounts, click here.

Fact: With few exceptions, there are no limitations on Account Owners or Beneficiaries. Parents, grandparents, aunts, uncles, friends - almost anyone can be an Account Owner, provided they are a U.S. Citizen or resident alien, have a Social Security number or Tax ID number, and have a permanent U.S. address. Even trusts, corporations, and non-profit organizations with valid Tax ID numbers may be Account Owners.

1Source: BlackRock. Based on $9.46 trillion in AUM as of 12/9/21.

2An eligible institution is one that can participate in federal financial aid programs and K-12 programs.

3Arkansas taxpayers can deduct up to $5,000 (up to $10,000 for married couples making a proper election) of their Brighter Future Advisor Plan contributions from their Arkansas adjusted gross income with any unused excess contribution in a tax year being carried over to the next succeeding four tax years, beginning January 1, 2017.

4The aggregate balance of all 529 plan accounts sponsored by the State of Arkansas for the same designated beneficiary may not exceed $500,000.

5In the event the donor does not survive the five-year period, a pro-rata amount will be added back to the donor's taxable estate.

6Principal or interest on any qualified education loan (as defined in section 221(d) of the Internal Revenue Code) of the designated beneficiary or a sibling of the designated beneficiary, up to a lifetime limit of $10,000 per individual. Note, if you make an education loan repayment from your Account, Section 221(e) (1) of the Internal Revenue Code provides that you may not also take a federal income tax deduction for any interest included in that education loan repayment.

7Contributions to the Plan in a tax year are deductible from Arkansas state income tax, up to $5,000 for individuals (up to $10,000 for married couples making a proper election), subject to recapture in subsequent years in which nonqualified withdrawals or a rollover to another state's 529 plan is made. Earnings on non-qualified withdrawals are subject to federal income tax and may be subject to a 10% federal penalty tax, as well as state and local income taxes. The availability of tax or other benefits may be contingent on meeting other requirements.

8All contributions in excess of $16,000/giftee are pro-rated over a 5-year period for the purposes of accelerated gifting. If the Account Owner chooses to use the 5-year election and dies before the end of the 5-year period, the portion of the contribution allocable to the calendar years remaining (beginning with the calendar year after the Account Owner's death) would be included the Account Owner's estate.

9You should consult with a tax advisor when considering a change of beneficiary.

10Virginia's 529 plans have a 30-year limitation on the use of assets.

11Earnings on non-qualified distributions are subject to federal income tax and may be subject to a 10% penalty, as well as state and local income taxes. The availability of tax or other benefits may be contingent on meeting other requirements.

12For the tax year 2022, the first $1,150 of your child's unearned income is untaxed. The next $1,150 is taxed at their marginal rate. Unearned income that exceeds $2,300 is then subject to the parent’s marginal rate. This rate bump is known as the "Kiddie Tax," and is a tax rule that affects investment and unearned income for children under age 18 or dependent full-time students under age 24. This rule does not apply to individuals under these ages who are married and file joint tax returns.