Virginia529 College Savings Plan

Choosing the right Virginia529 College Savings Plan for your child’s education can be an important part of your estate plan.

Each of the 50 United States offers a variation of a 529 savings plan. However, a Virginia529 savings plan is the country’s largest 529 higher education fund. It is a growing commodity for families planning to send their children to college.

Virginia529 plans are “flexible, affordable, and tax-advantaged” to make it easier to save for your child’s future.

Virginia529 College Savings Plan Programs

The state of Virginia offers four distinct 529 savings plan options.

1. The Virginia529 inVest Plan

There are several appealing factors to the Virginia529 inVest plan for college savings:

  • No age restrictions
  • No salary restrictions
  • Year-round enrollment offered
  • Minimum $25 deposit for enrollment
  • Multiple investment options

Overview

The Virginia529 inVest is a “direct-sold” option that offers stock and bond portfolios to fund a beneficiary’s education. This means that the plan isn’t agent-sold, and therefore there are lower fees.

Age-based v. Static

There are two types of portfolios that a Virginia529 inVest plan will offer:

  1. Age-based portfolios
  2. Static portfolios

The age-based portfolio will provide a range of investment opportunities based on the age of the beneficiary. These opportunities will automatically change over time as the beneficiary ages. While the portfolio’s investments are not limited to the beneficiary’s age, it is a guiding factor in helping you to successfully invest based on your “risk tolerance”.

In contrast, the static portfolio will provide an investment that does not change over time.

You also have the opportunity of investing in both portfolios, should you feel it is a manageable risk.

Management of a Virginia529 inVest College Savings Plan

The money in an inVest account can be used for a range of academic expenses in higher education, including tuition, university fees, student housing, textbooks, supplies, and more.

The Virginia inVest portfolio implies your assumed consent to risk losses in both interest and principal accrued by the account. This means that there are no guarantees of how well your account will manage over time. The success of your account will depend on your own investment strategy or the help of an investment manager to advise you along the way.

2. The Virginia529 prePAID Plan

Overview

This option is much less risky than a Virginia529 inVest plan, with several notable differences.

The Virginia529 prePAID plan is a prepayment of tuition, fees, and other anticipated expenses. You can enroll for this plan if your children are between kindergarten and 9th grade, and the funds will cover more than Virginia public institutions: they cover Virginia private institutions, and out-of-state institutions.

However, the amount prepaid will be determined by the cost of Virginia in-state, public tuition averages. Therefore, you may not have enough prepaid for your child to attend a university that is private or out-of-state.

Unlike the Virginia529 inVest plan, the Virginia529 prePAID plan offers limited enrollment deadlines each year. The account owner or the beneficiary must be Virginia residents in order to enroll.

It is possible to roll the investments of a Virginia529 savings plan into a prePAID plan, if all requirements are met at the time of application for enrollment.

Tier I v. Tier II

For a Virginia529 prePAID plan, there are two levels of pricing to make the plan more affordable.

A Tier I semester covers a Virginia public four-year college cost of tuition for one semester. If applied to a Virginia public two-year college, it will cover more than a single semester.

Alternatively, a Tier II semester covers a Virginia public two-year or community college. If applied to a Virginia public four-year college, it will cover less than a single semester.

However, the Virginia529 prePAID is able to be applied to any academic institution. The funds of the Virginia529 prePAID program are applied to the tuition and fees of a university.

Additional Information

As with all 529 plans, the Virginia529 prePAID plan comes with its own stipulations. There are detailed descriptions of fees that are covered, including what are deemed “optional” fees. Additional expenses for a specific course of study or an extensive course-load is not covered by prePAID.

3. CollegeWealth Plan

Overview

The CollegeWealth plan operates differently from the Virginia529 plans. CollegeWealth is insured by the Federal Deposit Insurance Corporation (FDIC) as a Virginia529 program. The FDIC coverage provides the comfort of a deposit account, paired with the federal and state tax advantages.

Banking participants include BB&T and Union Bank & Trust. Opening an account is as simple as making a $25 minimum deposit upon application, with an APR that varies depending on your bank.

Tax Advantages

Virginia CollegeWealth plans are exempt from federal income taxes, as well as withdrawals made for academic use. These benefits include an annual income tax deduction of $4,000 per account in the CollegeWealth plan.

There is no state residency requirement, income threshold, and are flexible to your paytable and budget.

Disclaimer About the CollegeWealth Plan

An FDIC-insured savings plan, such as the CollegeWealth program, is insured up to $250,000 per plan. Therefore, the maximum contribution to a beneficiary is limited to $500,000 in total.

4. CollegeAmerica Plan

Overview

A much more exclusive plan for funding your child’s education, the CollegeAmerica fund is only available through a financial advisor.

This plan allows you to choose from different American Funds while your financial advisor works with you to establish a financial plan that meets the needs of your college savings plan.

It is a tax-free program, covering all academic expenses.

(Note: The exclusive nature of a CollegeAmerica plan will require you to consult a financial advisor before proceeding.)

Virginia529 in Estate Planning

studentsWhen planning your estate, you have the option of establishing a Virginia529 college savings plan for your children and grandchildren.

Establishing a Virginia529 for your children is done by enrolling in the program of your choice. In your estate plan, each child must be listed as the beneficiary of the Virginia529 plan that covers them.

Virginia529 plans are also available for grandparents who want to create a stable foundation for their grandchildren’s educations. While grandparents can establish the same 529 accounts as parents, there are a few differences in how the Virginia529 is financially managed.

As with a parental Virginia529, the grandparents must list the grandchild of each account as the beneficiary of that plan in their estate plan.

As mentioned, the CollegeWealth plan offers a $4,000 state income tax deduction per year, per account. However, this amount is not applicable for account holders over 70 years of age or more, who are able to deduct the entire amount of contributions.

Therefore, it is still possible to establish a Virginia529 college savings plan for grandchildren. It is just a matter of foregoing the tax advantages that certain plans may offer to the parents of the beneficiaries.

Conclusion

So, whether you have children in grade school or one on the way, it’s never too soon to start planning for your child’s academic success. Schedule a consultation with our estate planning lawyer to find out where a Virginia529 college savings plan fits into your estate plan.

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