Kim Finkle, MBA, Staff Financial Advisor

Colorado 529 Plan: A Great Option for Co-parents

The Colorado 529 plan, like most 529 plans offered by other states, is a tax-advantaged college savings account. This means that contributions grow tax-free, and qualified withdrawals for educational expenses are not taxed. The Colorado 529 plan is a great option for co-parents because:

• There is no residency requirement to contribute. This allows either parent to participate regardless of where they live.
• Funds can be used at any accredited educational institution. This gives your child the flexibility to choose the college that best suits them, in-state or out-of-state.
• Multiple contribution options exist. This allows each parent to contribute according to their financial situation, as agreed upon in a court order or separate agreement.

 

How Co-parents can Manage a Colorado 529 Plan

There are a few ways divorced or separated parents can manage a Colorado 529 plan for their child:

• Open Separate Accounts: Each parent can open their own separate Colorado 529 plan for the beneficiary (the child). This allows for independent control over contributions and withdrawals.
• Joint Ownership is Not Allowed: While some states allow for joint ownership of 529 plans, Colorado does not. This means only one parent can be the account owner, but the other parent can still contribute.  Alternatively, both parents can set up separate accounts.

 

Important Considerations for Co-parents

• Communication is Key: Discuss contribution amounts, investment strategies, and beneficiary designations openly with your co-parent.
• Legal Agreements: Consider including specific details about the 529 plan in your divorce decree or a separate agreement to avoid future disputes.
• Tax Implications: Be aware of tax implications for both contributions and withdrawals, especially if one parent contributes more than the other. Consulting a financial advisor can be helpful.

 

Colorado 529 Plan vs. Other States' 529 Plans

While the Colorado 529 plan offers many benefits, it's important to compare it with plans from other states, especially if your child might attend a college in a different state. Here's a quick comparison of Colorado with 5 other popular 529 plans:

State	Investment Options	State Tax Benefit	Additional Benefits
Colorado	Variety of Options	In-state income tax deduction	None
Alaska	T-Rowe Price Funds	In-state income tax deduction	Can be used for K-12 tuition up to $10,000/year
California	Multiple Portfolio Options	Up to $2,500 tax credit	Can be used for private K-12 tuition
Nevada	Vanguard Target-Date Funds	No state tax benefit	None
New York	BlackRock Target-Date Funds	Up to $10,000 tax deduction	Can be used for K-12 tuition up to $10,000/year
Utah	Various Investment Options	Up to $3,000 tax credit	None

 

Alternatives to 529 Plans

While 529 plans offer tax advantages, they may not be the only option for divorced or separated parents saving for their child's education. Here are a few alternatives to consider:

• Custodial Savings Accounts (UTMA/UGMA): These accounts allow you to invest on a minor's behalf, but funds can be used for any purpose, not just education. Earnings may be taxed.
• Savings Accounts: A regular savings account won't offer tax benefits, but it can be a good option for short-term savings goals.

 

Conclusion

The Colorado 529 plan is a valuable tool for divorced or separated parents to save for their child's college education. By understanding the plan's features, comparing it with other state options, and considering alternative savings vehicles, you can ensure your child has a brighter financial future.

Remember, consulting with a financial advisor can help you develop a personalized college savings plan that meets your specific needs and goals.

 

 

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.