How to Use Your Account
CollegeAmerica is a 529 college savings plan offered by Virginia529, an independent agency of the Commonwealth of Virginia, and American Funds.
CollegeAmerica allows you to save for higher education expenses through a tax-advantaged account invested in the American Funds. 529 plans are named after the section of the Internal Revenue Code that created them.
You can open an account by contacting any broker or financial professional authorized to sell American Funds and CollegeAmerica.
You can invest as little as $250 per fund ($1,000 for American Funds Money Market Fund®). For an employer-sponsored program, you may invest as little as $25 per fund.
Anyone who is a U.S. citizen or legal U.S. resident can establish a CollegeAmerica account. You do not have to be a resident of Virginia.
Yes. A child can establish a CollegeAmerica account. If he or she is a minor, however, a parent or guardian must sign the account application.
Yes. However, there may be legal considerations. It is the responsibility of the trustee of a trust to determine whether any provision of the trust is inconsistent with the requirements of Section 529.
As a general matter, an investment in a 529 account may not be appropriate for many trusts. For an investor who wishes to eliminate the need for probate of assets set aside for the higher education of family members or friends, direct ownership of a CollegeAmerica account may be a better alternative than ownership of a CollegeAmerica account through a trust. A CollegeAmerica account is generally not an asset of the probate estate of the account owner upon death.
No. Joint ownership is not permitted.
Yes. We strongly encourage you to designate a successor account owner. However, a successor account owner cannot be named for an UGMA/UTMA account or an account owned by a trust or other entity.
If you die or are declared legally incompetent, the designated successor becomes the account owner. If you die and there is no successor owner, the beneficiary will become the account owner if 18 or older. If the beneficiary is younger than 18, the individual(s) responsible for the estate of the account owner will be authorized to name a new account owner.
The account can be opened for the benefit of any U.S. citizen or legal U.S. resident, including the account owner. The beneficiary does not need to be related to the account owner.
No. The beneficiary can be any age.
Yes. You can change the beneficiary of a CollegeAmerica account at any time. To avoid treatment of the change as a withdrawal, the new beneficiary must be a member of the family of the previous beneficiary.
Generally, a member of the family includes the beneficiary’s immediate family. The following individuals are considered to be members of the family:
A legally adopted child is treated as the child of the adoptive parent as if by blood. The terms “brother” and “sister” include half-brothers and half-sisters.
A permissible change of beneficiary will be treated as a gift from the previous beneficiary to the new beneficiary if the new beneficiary is one or more generations younger than the beneficiary being replaced.
If you change the beneficiary to a new beneficiary who is more than one generation younger than the previous beneficiary, the generation-skipping transfer tax may be triggered.
You can withdraw the assets if the beneficiary receives a scholarship, becomes disabled or dies. A withdrawal on account of the beneficiary’s death, disability or receipt of a scholarship (to the extent of the scholarship award) is subject to federal income tax but no federal tax penalty.
With a 529 savings plan, you can leave the money in the account if the beneficiary decides to attend college at a later time. Or you can select a new beneficiary, including yourself or anyone who is a member of the current beneficiary’s family.
If you withdraw money from the account for anything other than educational expenses, the withdrawal will be subject to ordinary federal income tax plus a 10% penalty on the earnings.
No. Only one individual can be designated as the beneficiary of an account.
You can use the assets in your account to pay for the beneficiary’s qualified higher education expenses. Earnings withdrawn for any use other than qualified higher education expenses are subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax.
A withdrawal on account of the beneficiary’s death, disability or receipt of a scholarship (to the extent of the scholarship award) is subject to federal income tax but no federal tax penalty.
CollegeAmerica accounts can affect a beneficiary’s ability to qualify for federal need-based financial aid.
A 529 account, such as a CollegeAmerica account, is regarded as an asset of the student if the student is an independent student, and an asset of the parent if the student is a dependent student. An independent student generally includes an individual who:
No. You can use a CollegeAmerica account to pay for qualified higher education expenses at an eligible educational institution in any state.
The maximum contribution limit is $350,000 for each beneficiary. The $350,000-per-beneficiary limit applies across all plans administered by Virginia529, including CollegeAmerica, Virginia529 inVEST℠, Virginia529 prePAID℠ and CollegeWealth. Multiple accounts for the same beneficiary will be combined to determine if the maximum contribution amount has been reached.
Once the total account balance (including any earnings) reaches $350,000, we will not accept additional contributions or rollovers. If the total account value is below $350,000, you can contribute regardless of how much you have already contributed.
You can contribute funds by check or an automatic purchase plan. You cannot contribute securities or other property. For an employer-sponsored program, contributions generally must be made through an automatic purchase plan.
Anyone can contribute to the account. However, only you, the owner, can make decisions regarding the account, including taking withdrawals from the account, changing the account’s investments and changing the beneficiary.
People or entities other than you that contribute funds to the account cannot receive state tax benefits from the contributions.
No. Having a CollegeAmerica account does not guarantee admission to a college in Virginia or elsewhere.
Yes. Contributing to CollegeAmerica will not affect your ability to invest in other education savings vehicles such as a Coverdell Education Savings Account.
Qualified higher education expenses generally include:
Paying off a student loan is not considered a qualified expense.
Most community colleges, public and private four-year colleges, universities and vocational schools in the United States are eligible educational institutions. Some foreign institutions are also eligible. To find out if a school is eligible, go to the Department of Education’s website.
You, the account owner, or your beneficiary makes the determination and must retain appropriate documentation to show that a withdrawal was made for qualified higher education expenses.
Yes. You can use the assets for undergraduate and graduate school as well as specialized training, such as medical school or law school.
CollegeAmerica is designed to pay higher education expenses. Therefore, a withdrawal used for tuition at a private elementary or high school will be subject to federal income tax and a 10% federal tax penalty on earnings.
There is no minimum level of study. If, however, the student is enrolled on a less than half-time basis, withdrawals for room and board will not be considered qualified higher education expenses.
Yes. You need to use the assets in the account or designate a new beneficiary within 30 years after the beneficiary graduates from high school or within 30 years after opening the account, whichever comes later. (Requests for an extension of this time limit will be considered on a case-by-case basis.)
Yes. You can have a withdrawal transferred to the checking or savings account linked to the CollegeAmerica account. This transaction may take place online, over the phone, or by mailing us a completed CollegeAmerica Distribution Request Form.
Direct deposit withdrawals requested online are limited to $25,000 per day. Payments will be deposited into your bank account within three business days of the transaction date. (You need to submit a completed FundsLink® form to link a bank account. A signature guarantee may be required.)
Yes. Call us at (800) 421-4225 to redeem up to $125,000 per day from a CollegeAmerica account and have the money sent directly to an eligible educational institution. We’ll need the name and address of the institution when you call.
It depends to whom the distribution is made payable. If the withdrawal is made payable to you, then the tax reporting will be under your Social Security number. If withdrawals are made payable to the account beneficiary or to the school, then the tax reporting will be under the beneficiary’s Social Security number.
You may invest in one or more of the American Funds available in CollegeAmerica. CollegeAmerica is designed for you and your financial professional to choose an investment portfolio that fits your financial plan, time horizon and tolerance for risk.
Capital Research and Management Company℠, one of the oldest and most respected investment management firms in the United States, serves as investment advisor to the American Funds investment options in CollegeAmerica.
Yes. You can purchase Class 529-A, 529-C or 529-F-1 shares through your financial professional. However, to invest in Class 529-C shares of American Funds Money Market Fund®, Intermediate Bond Fund of America® and Short-Term Bond Fund of America®, you must exchange from Class 529-C shares of other American Funds.
If your employer offers an employer-sponsored option, you may also purchase Class 529-E shares. Each fund share class has different fees and expenses.
Please consult your financial professional to determine which share class is best for you.
Yes. You can change investments twice every calendar year or when you change the beneficiary.
If you have accounts for the same beneficiary with Virginia529 inVESTSM, CollegeAmerica and CollegeWealth, you may change the investments in any account twice per calendar year without tax consequences, provided that any change to more than one account is made at the same time.
Changing the allocation of future automatic investments does not count toward the investment allocation restriction.
No. CollegeAmerica accounts are not deposits or obligations of, or insured or guaranteed by, the Commonwealth of Virginia or any agency or instrumentality thereof, the United States government, the program manager, any financial institution, the Federal Deposit Insurance Corporation or any other federal or state governmental agency, entity or person.
No. There is no guarantee that the money in the account will be sufficient to cover the higher education expenses of the beneficiary.
Start by choosing the fund with the target date closest to the year the beneficiary is expected to enroll in college. Target date funds are designed to be a one-time investment selection. Over time, experienced investment professionals will adjust the underlying mix of American Funds so that the allocations remain appropriate for the fund’s time horizon. Eventually the assets transition into the College Enrollment Fund, a preservation-oriented portfolio of high-quality, shorter term bonds. The assets remain there until they’re withdrawn.
Though not typical, investors in the College Target Date Series may also invest in other funds within the same CollegeAmerica account.
You can choose to invest in any combination of funds or portfolios offered in CollegeAmerica.
Yes. You can move your existing CollegeAmerica assets into the College Target Date funds if you have not already reallocated your existing account balance two times during this calendar year.
The IRS allows you to reallocate your CollegeAmerica assets twice every calendar year. If you have already reallocated your existing account balance two times during this calendar year, you will need to wait until the next calendar year before you can move assets into the funds. Talk to your financial professional to learn more.
The College Enrollment Fund is a preservation-oriented portfolio of American Funds bond funds and does not follow an allocation glide path. Each College Target Date fund follows a glide path that automatically adjusts its allocation to become more preservation-oriented over time. As enrollment nears, the assets transition into the College Enrollment Fund and remain there until they’re withdrawn.
Effective July 1, 2014, CollegeAmerica, offered by American Funds, is waiving the $10 setup and $10 annual account maintenance fees. You will be charged fees and expenses associated with the applicable American Funds share class, as more fully described in each fund’s prospectus.
Yes. CollegeAmerica will accept funds from other 529 plans.
You can roll over funds without federal income tax consequences from one 529 plan to another 529 plan for the same beneficiary once every 12 months.
Yes. You may transfer your Coverdell account or proceeds from qualified U.S. savings bonds into CollegeAmerica without adverse tax consequences. You may need to meet income limits to avoid federal income tax on any savings bonds you redeem. Please consult your tax advisor regarding the tax consequences of such a transfer.
Yes, but there are significant legal and tax considerations. The custodian of a Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) account may be required to sell the assets in the UGMA/UTMA account — a taxable event.
Generally, when the custodian invests the cash proceeds of the UGMA/UTMA account in a CollegeAmerica account, the beneficiary of the UGMA/UTMA account must also be the beneficiary of the CollegeAmerica account and cannot be changed.
If you want to change beneficiaries, you should seek legal advice, as funds held in UGMA/UTMA accounts represent an irrevocable gift to a specific individual. Moreover, upon receipt of notification that the beneficiary has reached the age of majority (18 or 21 in most states), the beneficiary may assume control over the account.
Your financial professional’s firm may restrict transfers from UGMA/UTMA accounts. We urge you to consult your financial professional before making a transfer from an UGMA/UTMA account to CollegeAmerica.
Earnings in a CollegeAmerica account can grow free from federal income tax. You may exclude the earnings on withdrawals used to pay qualified higher education expenses from income for federal tax purposes.
No. Contributions to CollegeAmerica are made with after-tax dollars.
If you are a resident of Virginia, there is a deduction for CollegeAmerica contributions.
If you reside in a state other than Virginia, please read the state income tax section of the CollegeAmerica Program Description and consult your financial professional for state tax information.
A resident of Virginia who is the owner of a CollegeAmerica account may deduct contributions of up to $4,000 from his or her state taxable income. If more than $4,000 is contributed in one year, the remainder may be carried forward and deducted in future tax years. For account owners age 70 and older, the entire amount of any contribution may be deducted in the year contributed or in a future year.
Your deduction is subject to recapture in the year a withdrawal is made for any reason other than to pay qualified higher education expenses or due to the beneficiary’s death, disability or receipt of a scholarship (to the extent of the scholarship award).
Individuals can take advantage of the annual gift tax exclusion by contributing up to $14,000 ($28,000 for married couples) per year per beneficiary without having to file a gift tax return or pay gift taxes.
Contributions made to a 529 plan in excess of the annual gift tax exclusion will not cause gift taxes to be payable unless the contributions (together with all other gifts) also exceed the contributor’s lifetime gift-tax exemption of $5,430,000 in 2015. However, those contributions will reduce the amount of the lifetime exemption.
A special rule applicable only to 529 plans allows an individual to accelerate up to five years’ worth of annual exclusions by contributing up to $70,000 ($140,000 for married couples) in one calendar year. While no gift taxes are payable, the donor can only take advantage of this rule by making an election on a federal gift tax return, IRS Form 709.
If you take full advantage of this special rule, additional contributions or other gifts to the same individual during that calendar year or the next four calendar years may exceed the annual gift tax exclusion.
If you, the account owner, make an election to take advantage of the special five-year annual gift tax exclusion and die within five calendar years of making that election, the portion of the contribution allocable to years after the year of the your death (excluding any earnings on such contributions) will be included in your estate for estate tax calculation purposes. Otherwise, the value of the account is not included.
The generation-skipping transfer tax may apply either when a person contributes to an account for someone who is more than one generation younger than the contributor, such as a grandchild; or when you, the account owner, change the beneficiary to a new beneficiary who is more than one generation younger than the previous beneficiary.
You can select a new beneficiary who is a member of the family of the previous beneficiary without income tax or penalty.
You can also choose to withdraw the funds, but you will have to pay federal income tax and a 10% federal tax penalty on the earnings.
If you are not a resident of Virginia, please read the state income section of the CollegeAmerica Program Description for more information.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Depending on your state of residence, there may be an in-state plan that offers tax and other benefits not available through CollegeAmerica. Before investing in any state's 529 plan, investors should consult a tax advisor.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses, summary prospectuses and CollegeAmerica Program Description, which can be obtained from a financial professional and should be read carefully before investing. CollegeAmerica is distributed by American Funds Distributors® and sold through unaffiliated intermediaries.