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Copy of book.gif (2209 bytes)  Chapter 6 - What to Look For In A QSTP

Beyond the basic distinctions of the two types of QSTPs there are myriad differences in the program design among the many different QSTPs in operation today. The following list describes many of the areas in which the programs may differ from one another.

Eligible beneficiaries

  • What eligibility restrictions are imposed by the QSTP on the naming of a designated beneficiary?
  • Does the beneficiary need to be less than a specified age, or specified grade in school?
  • Does a birth certificate need to be provided?
  • Can a non-U.S. citizen be a designated beneficiary?
  • Does the designated beneficiary need a social security number?
  • Does the QSTP allow the donor to name himself as designated beneficiary?

Comment: The tax law appears to contain no restrictions on who can be named as the designated beneficiary. Many prepaid tuition plans have age or grade restrictions designed to ensure that funds can be invested by the program for a certain time period.

Account ownership

State residency requirements

Minimum and maximum contributions

Payment methods

Time limits on use of account

Eligible education expenses

Payment of qualified higher education expenses

Effect on financial aid eligibility

Substitute beneficiaries

Rollovers between QSTPs

Refund policies

Penalties

Investment considerations

Safety of the investment

Creditor protection

State income tax

State inheritance and gift tax

Other state benefits

Program administration

Satisfaction with the program

Fees

Qualification under IRC section 529

 

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