College Savings for Grandparents

As a grandparent, you want the best for your grandchildren, including helping them receive the best education possible. If you want to save for your grandchildren’s higher education, opening a Utah Educational Savings Plan (UESP) account is a great way. In fact, approximately 20% of the UESP accounts are owned by grandparents.

You're in control

You remain in control of the account even though your grandchild is listed as the beneficiary on the account. You determine the investment option, the contribution amounts, and request the withdrawals.

You can contribute systematically or during special occasions

There are no minimum contribution requirements to save with UESP. You can make monthly contributions or contribute funds for special occasions such as birthdays and holidays. UESP has an online feature, Special Occasion Contributions, that as an account owner, allows you to set up annual contributions for a birthday, holiday, or for another special event for your beneficiary. Click here to learn about other methods of contributing to your grandchildren’s UESP account.

If you prefer not to open a UESP account for your grandchild, you can still contribute to an existing account that has a different account owner. To do this, mail a check to UESP with the beneficiary’s name and account number written on the front. Any applicable state tax benefits will be available to the account owner.

You can also use the UESP Gift Notice. After you download the Gift Notice, give your grandchild the bottom portion to let him or her know you made the contribution. Complete and send the top portion with your contribution check to UESP.

As a UESP account owner you receive the tax benefits

• Tax-free earnings. Earnings in your UESP account will grow tax-deferred from federal or Utah state income taxes on the earnings. And when you withdraw funds to use for qualified higher education expenses, no Utah state or federal income taxes are assessed.

• Utah state income tax credit. While saving with UESP helps financially prepare your grandchildren for future college expenses, many Utah taxpayers choose to save with UESP because of the Utah state income tax credit available to them.

  For the 2012 tax year, account owners who are Utah taxpayers/residents may be able to claim a credit or deduction for contributions to their UESP account(s). Individual tax filers and Utah-based trusts can claim up to $89 in tax credits per qualified beneficiary. Taxpayers married filing jointly can claim up to $178 in tax credits per qualified beneficiary. Account owners can contribute more or less than this amount, but these figures represent the maximum contributions that qualify for the Utah tax benefit.

  Keep in mind that to be eligible for the Utah state tax savings, the account must have been established before the beneficiary designated on the UESP account was age 19. If the account is eligible for the tax savings, the account owner can continue to claim the tax savings for each year’s contributions—for the life of the account. And as long as the account owner is a Utah taxpayer/resident, the account owner can claim the tax benefits no matter where the beneficiary lives—even in another state or country.

• Special gift tax exclusion. Funds contributed to UESP are treated as a completed gift to the beneficiary for federal estate and gift tax purposes.

  Normally, up to $13,000 ($26,000 if filing jointly) may be gifted from one individual to another each year without incurring gift tax liability. A special provision for 529 plans allows an individual to give $65,000 ($130,000 if married filing jointly) to a single beneficiary in one year without creating a taxable gift, as long as the individual makes an election to treat the entire gift as a series of five equal annual gifts. This means that a $65,000 five-year averaging election counts as a series of five $13,000 contributions, and a $130,000 five-year averaging election counts as a series of five $26,000 contributions. However, the individual cannot make any additional gifts to that beneficiary during the five-year period without being subject to federal gift tax rules.

Interested Parties Feature

The Interested Parties feature allows you to let your grandchildren, the parents of your grandchildren, or another individual you select to monitor UESP accounts only. An interested party has read-only access to view transaction history, account owner and beneficiary names and addresses, successor and secondary successor names, investment options, account balances, and quarterly statements. UESP will not give account information to interested parties through e-mail, fax, letter, or over the phone. The interested party can only view account information online.

TIP: To get Interested Parties access, you need to open a UESP account, and grant access under Account Access at uesp.org. Simply follow the steps below.

1. Go to uesp. org and log in to Account Access.
2. Click on the Interested Parties link.
3. Click on Add an Interested Party and fill in the information.
4. Follow the directions on the screen to obtain an initial authorization PIN that the interested party needs to access the UESP account for the first time.

The PIN expires in ten days. Go to the UESP Program Description, Part 3 | Program Participation Information for more information.

You can also set up Interested Party access by completing UESP’s Interested Party Authorization form (form 120). Call 800.418.2551 or e-mail info@uesp.org to request a copy of the form.