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	Thor Yarabek		(321) 255-2727
	Allstate Personal Financial Representative

Allstate Products / Education Savings / Education Savings Investment Options

Education Savings Investment Options

Education savings like Coverdell Education Savings Accounts and 529 College Savings Plans differ in eligibility requirements, distribution rules and other key characteristics. Use this comparison table to help you decide which option is right for you.

Characteristics of Coverdell Accounts vs. 529 College Savings Plans

	Coverdell Education Savings Accounts	529 College Savings Plans
What is it?	A tax-advantaged account that allows you to choose your investments.	Flexible, tax-advantaged plan named for a section of the Internal Revenue Code.
Tax Treatment	Earnings accumulate federal tax free. Money withdrawn for qualified education expenses isn't taxed as income.	Federal tax free earnings and distributions, if used for qualified higher education expenses. Most states provide tax-free distributions for residents invested in own state's plans. Some states provide a tax deduction for contributions.
Financial Aid	Accounts are held in the child's name and may have significant financial aid impact.	Current rules provide for lower weighting in financial aid equations if held in parents' or grandparents' name.
Investment Options	Stocks, bonds, mutual funds and certificates of deposit (CDs).	Limited since assets are managed by investment professionals.
Advantages	Flexibility to choose and change investments. Assets can also be used for qualified elementary and secondary school costs.	Funds can be used at any college in any state for qualified higher education expenses. Fund is transferable to another family member.
Disadvantages	No guarantee of specific return. Contributions are limited to only $2,000 per year. Income limits on contributions begin at $95,000 for singles, $190,000 for joint returns. Assets must be distributed at age 30 unless special needs beneficiary.	No guarantee of specific return. Portfolio is managed by investment firm; generally, you'll have limited control. Account fees and expenses are charged.

Additional education savings options include:

529 Prepaid Tuition Plans—These plans, offered by states and coalitions of certain private colleges and universities, allow you to "lock up" the price of college at the year you start paying into the plan. Earnings are tax deferred. Distributions for qualified education expenses are free of federal taxes and may be free of certain state taxes.
Education Savings Bond Program—Series EE US savings bonds can be used to pay for qualified education expenses. You purchase the bonds at a discount to their face value—the amount the bond will be worth when it matures. The bonds are easy to redeem but often slow to mature. Interest paid on qualified savings bonds issued after 1989 is excludable from your income if used for qualified higher education expenses. You may have to pay federal, state and local tax penalties on the original purchase discount if bonds aren't used for qualified higher education expenses.
Custodial Accounts—Depending on your state, custodial accounts are known as either Uniform Gift to Minor Act (UGMA) or Uniform Transfer to Minors Act (UTMA) accounts. They're opened in the child’s name, and the first $750 in earnings is federal tax free. If the child is under 14, the next $850 is taxed at the child's rate and all earnings above $1,600 are taxed at the parents' rate. The child has access to the accounts at age 18 or 21 and doesn't have to use the money for education.

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Related Allstate Products

Coverdell Education Savings Accounts

529 College Savings Plans

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529 college savings plans vary by state, including contribution limits, state tax advantages, investment options and fees and expenses. You should carefully consider, before investing, whether your or the designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's 529 college savings plan. Investment in 529 college savings plans grows tax-deferred, and distributions, if used for qualified higher education expenses, are federal tax-free. Please note that tax-free withdrawals for qualified higher education expenses are set to expire in 2011 unless the law is extended by Congress. Nonqualified withdrawals are subject to current ordinary income taxes and may be subject to an additional 10% federal tax penalty. Tax laws are subject to change and contributions and earnings may not be adequate to meet future educational expenses. Participation in a 529 college savings plan does not guarantee that contributions and earnings will be adequate to cover your child’s future college costs.

Allstate does not provide tax advice. Please consult your tax advisor for specific information.

Thor Yarabek is licensed to sell Allstate insurance products only in the state(s) of FL. The material contained in this Web site is applicable only in the state of FL. If you do not reside in the state(s) of FL, please go to the Find an Agent section on allstate.com to search for another Allstate representative.

This material is intended for educational purposes only. Allstate, through its insurance companies, subsidiaries, and brokers/dealers, offers a variety of products including life insurance and registered securities. Certain products, such as variable annuities, variable universal life insurance, mutual funds and 529 Plans, are available only through securities licensed representatives, and sales material must be accompanied by a prospectus. Life insurance and fixed annuity products are available from Allstate Life Insurance Company: Home Office, Northbrook, IL., and Lincoln Benefit Life Company: Home Office, Lincoln, NE. Securities offered by Personal Financial Representatives through Allstate Financial Services, LLC. Registered Broker-Dealer, Member NASD, SIPC. Main Office: 2920 South 84th Street, Lincoln, NE 68506. 877-525-5727.

Banking products offered through Allstate Bank, Member FDIC. Other products sold by Allstate are not insured by the FDIC, are not a deposit or other obligation of or guaranteed by Allstate Bank, and may be subject to investment risks, including possible loss of principal amount invested.

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(03/15/2006)