Kim Finkle, MBA, Financial Advisor

How Does The GIFT 529 Plan Work? 

Sponsored by the State of Arkansas, it offers a variety of investment choices, FDIC-insured CDs, and Mutual Funds. A program can be selected based on their child's age, investment style, and risk tolerance. Parents can also start a GIFT account to fund their education. The plan can start with as little as $10 a month with recurring contributions or a one-time contribution of $25. Parents can also opt for a direct payroll deposit with a $5 minimum per pay period. All contributions to accounts grow on a tax-deferred basis.

 

Enrollment Requirement  

There are no income or residency requirements.

 

Educational Programs Funded GIFT

• Apprenticeship - More and more students are opting for apprenticeships over a four-year college degree. The plan allows a student to pay books, equipment, fees, and supplies for on-the-job training with classroom instruction. The apprenticeship program must be registered with the U.S. Department of Labor.
• Vocational School - Trade schools are popular once again. The plan can be used to pay for a vocational school with a Federal School Code. A future tradesman/woman can pay for all qualified expenses including tuition, fees, housing, meal plans, books, supplies, computer technology, and equipment.
• Graduate and Undergraduate College - The plan can pay for qualified expenses including tuition, fees, housing, meal plans, books, supplies, computer technology, and equipment at any college or university in the U.S. as well as some international schools. 
• Continuing Education - The reality today is that to stay competitive in the job market we have to continue upgrading our skills. That may require us to go back to school to pursue a continuing education program or a degree program. The plan can pay for tuition, fees, housing, meal plans, books, supplies, computer technology, and equipment at a qualified institution. 

 

GIFT 529 Qualified Colleges

• University of Arkansas
• Harding University 
• Hendrix College
• Ouachita Baptist University
• University of the Ozarks
• John Brown University
• Other Arkansas public and private colleges 
• Out of State Colleges and Universities

 

Benefits of GIFT 529 Plan

• Tax-Deferred - All earnings on the plan are tax-deferred. The qualified distributions are also exempt from federal taxes if residency requirements are met. In addition to that, a couple can deduct up to $10,000 per year and a divorced or separated parent can deduct up to $5,000 tax-free.
• Federal Tax Exemption - All qualified distributions are exempt from federal income tax.
• Arkansas State Tax - The qualified distributions are also exempt from the state tax.  
• Supports in-state and out-of-state schools - You can use your savings for schools inside Arkansas or outside.
• Estate Planning - A married couple can take advantage of five years' worth of federal tax-free gifts at one time and contribute $150,000. For single, divorced, and separated parents, the limit is $75,000 per person. 
• Family and Friends Contributions - Anyone in the family or friends circle can contribute. Up to $30,000 for a couple and up to $15,000 for a single couple is exempt from the federal gift tax.
• Rollover - You can also roll over up to $15,000 per married couple and $7,500 per person from another state's plan.
• Flexibility - Designate a new beneficiary if the current beneficiary doesn't want to attend college.
• Plan Limit - The plan limit is $500,000, much higher than other states.

 

How to Enroll 

• You can enroll by going to the GIFT plan website.

 

Criticism for Arkansas Family College Savings Program

• Since the plan mainly invests in the stock market, the plan beneficiary may not have enough funds due to the market fluctuations.  
• Plan with savings account may not earn enough interest to pay for school. 
• Some distributions may be taxable.
• It gives an unfair advantage to the rich since they can save faster. 
• 0.53% fee is unfair.

 

Co-parents and GIFT 529

The Arkansas 529 plan can be a good option for divorced and separated parents residing in the state. The high plan limit allows parents to save more than enough to fund their child's education anywhere in the US.

 

529 Plans By State

1. Alaska 529 Plan

2. Alabama 529 Plan

3. Arizona 529 Plan

4. Arkansas 529 Plan

5. California 529 Plan

6. Colorado 529 Plan

7. Connecticut 529 Plan

8. Delaware 529 Plan

9. Florida 529 Plan

10. Georgia 529 Plan

11. Hawaii 529 Plan

12. Idaho 529 Plan

13. Illinois 529 Plan

14. Indiana 529 Plan

15. Iowa 529 Plan

16. Kansas 529 Plan

17. Kentucky 529 Plan

18. Louisiana 529 Plan

19. Maine 529 Plan

20. Maryland 529 Plan

21. Massachusetts 529 Plan

22. Michigan 529 Plan

23. Minnesota 529 Plan

24. Mississippi 529 Plan

25. Missouri 529 Plan

26. Montana 529 Plan

27. Nebraska 529 Plan

28. Nevada 529 Plan

29. New Hampshire 529 Plan

30. New Jersey 529 Plan

31. New Mexico 529 Plan

32. New York 529 Plan

33. North Carolina 529 Plan

34. North Dakota 529 Plan

35. Ohio 529 Plan

36. Oklahoma 529 Plan

37. Oregon 529 Plan

38. Pennsylvania 529 Plan

39. Rhode Island 529 Plan

40. South Carolina 529 Plan

41. South Dakota 529 Plan

42. Tennessee 529 Plan

43. Texas 529 Plan

44. Utah 529 Plan

45. Vermont 529 Plan

46. Virginia 529 Plan

47. Washington 529 Plan

48. West Virginia 529 Plan

49. Wisconsin 529 Plan

50. Wyoming 529 Plan

51. DC 529 Plan

Warning:  This post is neither financial, health, legal, or personal advice nor a substitute for the advice offered by a professional. These are serious matters, and the help of a professional is recommended as it can impact your future.