Utah Educational Savings Plan

Using Your Account

What can I use Utah Educational Savings Plan (UESP) account monies for?

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In general, money in your account may be used to pay for qualified higher education expenses, including tuition, fees, books, supplies, and equipment required for enrollment or attendance by a beneficiary at an eligible educational institution. Room and board expenses for beneficiaries who attend school at least half-time are also included, as are expenses for special needs services in the case of a special needs beneficiary.

 

Where can I use UESP funds?

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Funds can be used at eligible educational institutions, which generally include community colleges, public and private four-year colleges and universities, graduate and post-graduate programs, and certain proprietary and technical schools that participate in federal financial aid programs for students in the United States and abroad. You can find a complete list of eligible educational institutions at fafsa.ed.gov.

 

If health insurance is required for attendance at an eligible higher education institution, is it considered a
qualified expense?

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The short answer is that the IRS does not say one way or the other.

IRC 529(e)(3)(A)(i) defines qualified higher education expenses as “tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary at an eligible educational institution.”

If a school charges a student for health insurance, there may be an argument that it could be considered a “fee,” but there is no definitive guidance from the IRS. Private health insurance is not considered a qualified expense because the student does not pay a “fee” to the educational institution to be insured.

To be certain, however, you should consult with your own tax advisor.

 

When can I take money out of my account?

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You can withdraw your invested funds anytime. Withdrawal requests that involve uncollected funds will be delayed until the funds are available (up to 7 business days for a check and 4 business days for a one-time or recurring contributions).

 

How long will it take to get a check from my account?

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Your withdrawal will begin to be processed once UESP receives your request. Requests in good order will usually be processed within three business days after UESP receives the form. Please allow up to two weeks for your check to arrive. A withdrawal request can be made online or by using the Withdrawal Request form.

 

How do I make a qualified withdrawal?

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You can request a qualified withdrawal online or by completing a Withdrawal Request form. Based on your instructions, UESP will send the money to you, to the beneficiary, or to an eligible educational institution. You may schedule one-time withdrawals up to 90 days in advance. Please note that UESP will not process requests for more funds than are currently in an account. Requests for the entire account balance must indicate that the request is for the “entire market value.” You are responsible for retaining supporting documents showing that your withdrawal was used to pay for qualified higher education expenses.

 

Are there any special requirements to withdraw funds from my account?

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Some withdrawals may require a signature guarantee. A signature guarantee is a stamped or typed assurance by a financial institution that indicates a signature is valid. A signature guarantee can be obtained at most financial institutions, including banks, credit unions, or brokerage firms.

A signature guarantee is required for:

  • A single rollover or withdrawal request of $40,000 or more
  • Multiple withdrawal requests totaling $40,000 or more within a rolling 90-day period
  • A single rollover combined with withdrawal requests totaling $40,000 or more for the same beneficiary within a rolling 90-day period
  • A withdrawal request within 10 calendar days of an address change for the account owner or beneficiary
  • A rollover or withdrawal request within 10 calendar days of an account owner change
  • Any transaction request with a signature on the form that does not match the account owner’s signature on file

Withdrawal requests requiring a signature guarantee must be mailed to UESP with the original signatures and stamp. Neither faxed signature guarantees nor notarized signatures are accepted.

 

Will I have to pay taxes on withdrawals from my account?

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UESP funds used for qualified higher education expenses are free from federal and Utah state income taxes. There is no expiration date for tax-free withdrawals for qualified higher education expenses. Earnings used for non-qualified expenses are subject to federal and Utah state income tax, plus an additional 10% federal penalty tax. Also, there may be a recapture of any Utah state income tax credit or deduction previously claimed.

The additional federal penalty tax will not apply to non-qualified withdrawals due to the beneficiary's death, disability, scholarship (up to the amount of the scholarship), or attendance at a military academy. Utah residents may be required to recapture previously claimed Utah state income tax credits or deductions for such withdrawals made before February 26, 2010 (the effective date that Utah state legislation eliminated the recapture requirement).

 

What if the beneficiary decides not to attend college?

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If the beneficiary decides not to attend college, the account owner may change the beneficiary on the account to a member of the beneficiary’s family. The funds may also be withdrawn as a non-qualified withdrawal, but in most cases the earnings will be subject to federal and state income taxes (including the recapture of previously claimed state tax credits or deductions) and an additional 10% federal penalty tax. The additional 10% federal penalty tax and recapture of Utah state income tax credit or deduction (after February 26, 2010) does not apply to non-qualified withdrawals due to the beneficiary’s death, disability, receipt of a scholarship, or attendance at a military academy.

 

What if the beneficiary dies, becomes disabled, receives a scholarship, or attends a military academy?

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If the beneficiary dies, becomes disabled, receives a scholarship, or attends a military academy, then the account owner can change the beneficiary on the account or request a non-qualified withdrawal. For such non-qualified withdrawals, the earnings portion will be subject to federal and Utah state income taxes but will be exempt from the additional 10% federal penalty tax otherwise applicable to non-qualified withdrawals. Utah residents may be required to recapture previously claimed Utah state income tax credits or deductions for such withdrawals made before February 26, 2010 (the effective date that Utah state legislation eliminated the recapture requirement).

 

Can I use the account as security for a loan?

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No. An account owner may not pledge, assign, or otherwise use the funds in a UESP account as security for a loan. Any pledge of interest in an account will be of no force and effect.