A 529 plan is designed to help families make financial preparations for the cost of college. Operated by an educational or state institution, these plans take their namesake from Section 529 of the Internal Revenue Service Code, which defined and outlined the parameters of these plans in 1996. While some 529 plans have residency requirements, the TNStars College Savings 529 Program is open to all U.S. residents and resident-aliens. Furthermore, 529 plans have no income requirement, age limits or annual contribution limits and earnings are not subject to federal income tax when used for qualified higher education expenses.
Tax Free Growth:
Any earnings on contributions invested in a 529 plan grow tax-deferred and may be withdrawn tax-free when used for qualified higher education expenses.
Favorable Federal Estate Tax Treatment:
While the account owner retains ownership of the account, contributions made to 529 accounts are considered “completed, present interest gifts” for tax purposes and qualify for gift tax exclusion. This special tax treatment holds true up to $15,000 in a year for single-filers and $30,000 for joint-filers. However, it is also possible to gift a lump sum of $75,000 ($150,000 for joint-filers), by electing to have the contribution treated as if it were given over the course of 5 years.
You can transfer unused funds to a "member of the family" of the original beneficiary at any time.
Anyone Can Open an Account or Contribute:
You can open an account for your child, grandchild, niece, nephew, and even the neighbor’s kid – as long as you have their social security number. If you’re looking to kick start your savings, you can even open an account for yourself and transfer it to your child at a later date.
You can also contribute to an existing account through gifting.
TNStars is designed to give Tennessee families high quality investment options at a low cost to help them put aside money for higher education expenses. Tennesseans can invest directly with the program and money can be withdrawn tax-free from a TNStars account as long as it is used for qualified post-secondary education expenses. The savings program has been consistently ranked by Saving for College, LLC for investment performance since 2014.
No. As a direct-sold 529 plan, you can open and manage a TNStars account without the assistance of a financial advisor. However, if you have a financial advisor, we encourage you to discuss your TNStars account as part of your overall financial plan. You can even provide third-party access to a financial advisor if you would like to give him/her the ability to view and/or make transactions on your behalf.
Yes. The TNStars College Savings 529 Program is open and available to those who do not reside in the State of Tennessee. However, certain benefits of TNStars may not be available for account owners who do not reside in Tennessee. Before investing in any 529 plan, consider whether your home state or you beneficiary's home state offers any benefits that are only available through that state's 529 plan such as financial aid, scholarship funds, and protection from creditors to taxpayers or residents of those states that are not available with regard to TNStars. Taxpayers or residents of other states should consider such state tax treatment and other benefits, if any, before making an investment decision.
No. The money you save with TNStars College Savings 529 Program does not have to be used at a Tennessee college or university. In fact, TNStars funds may be used at any qualified higher educational institution in the United States or abroad, so long as that institution is willing and able to accept federal financial aid.
If the beneficiary your saving for does not attend college, you have a number of options:
1. Defer Use of Funds
You can choose to put off the use of the funds you have accumulated in your 529 account indefinitely, just in case your child decides to go to college later.
2. Transfer Funds to Another Beneficiary
At any point, you can transfer the funds in your TNStars account to another beneficiary as long as the new beneficiary is a "member of the family" of the original beneficiary. For example, if your oldest child decides not to go to college, you are free to transfer the money you saved for them to the account of your younger child.
3. Take A Refund
You are free to simply withdraw the money you have saved from your TNStars account at any point. However, if funds are withdrawn from a 529 program to be used for anything other than qualified higher education expenses, the earnings portion of the account will be subject to federal income tax as well as a 10% tax penalty.
Money saved in TNStars 529 plans maintains its tax-free status so long as it is used for “qualified higher educational expenses.” Expenses falling under this category are as follows:
- University Fees
- Room & Board (on or off-campus)
- School Supplies
- Necessary Equipment
Read through IRS Publication 970 and/or consult a tax advisor for more information about the treatment and tax-implications of withdrawals from 529 plans.
No. The beneficiary does not have to be your child. You can open an account for your child, grandchild, niece, nephew, and even the neighbor’s kid – as long as you have their social security number. If you’re looking to kick start your savings, you can even open an account for yourself and transfer it to your child at a later date.
TNStars charges an annual asset-based fee of 0.20% - 0.84% (or $0.20 - $0.84 for every $100) for all investment options with the exception of the First Tennessee Interest Bearing Account which has no fee. This annual asset-based fee includes the underlying investment expenses and program management fee. The annual asset based fee is divided over 12 months and applied to the account balance at the end of each month. There are no enrollment or front-load fees associated with TNStars.
The TNStars Program is not guaranteed by the State of Tennessee or any other entity. There are risks associated with investing your money in any type of investment, and in this sense, TNStars is no different. Depending on global economic factors, there is a risk that your TNStars account balance may dip below the amount that you deposited into the plan. However, our team works very hard to minimize this risk and deliver long-term growth to TNStars account holders. See our disclosure brochure relative to the risks of investing.
Yes. You may rollover a portion or your entire account balance from another qualified 529 college savings plan. For instructions on how to initiate a rollover, click here.