Talk to Us About Our Educational Savings Plans

As parents and grandparents, we want to provide our children with the brightest possible future. Education savings plans from State Farm® can help. Both the federal and state governments have made it easier to save for college. There are tax-favored choices that can help put a college education within reach.

Coverdell Education Savings Account (ESA)

The Coverdell ESA was created as an incentive to help parents and students save for education expenses.

The total contributions for the beneficiary of this account cannot be more than $2000, in any year, no matter how many accounts have been established.

Contributions to a Coverdell ESA are not tax-deductible, but amounts deposited in the account grow tax free until distributed.

State Farm College Savings (529)

The State Farm College Savings Plan is an education savings plan, sponsored by the State of Nebraska, designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which introduced these types of savings plans in 1996.

Our plan can be used to meet qualified expenses at most colleges nationwide. Your choice of school is not affected by the fact our plan is sponsored by the State of Nebraska.

UGMA/UTMA Accounts

UGMA and UTMA accounts allow you to invest for a child's future while taking advantage of the child's potentially lower tax rate.

While UGMA and UTMA accounts are not specifically designed to provide financing for college, many parents and grandparents use them for this purpose because the assets become available to the child when he or she reaches the age of majority specified under the state's UGMA or UTMA law.

Coverdell ESA State Farm College Savings Plan (529) UGMA/UTMA
Highlights The Coverdell ESA is a trust or custodial account that provides individuals a tax-advantaged method to save up to $2,000 per year for a child's education — both elementary/ secondary education (kindergarten through grade 12) and post-secondary education (college, graduate school, vocational school, etc.) — and may be established for the benefit of any child under age 18. The State Farm College Savings Plan is a qualified tuition plan operated according to section 529 of the Internal Revenue Code, The State Farm College Savings Plan, sponsored by the State of Nebraska, helps make college investing simple, affordable, and convenient.
An account can be established for a child under the Uniform Gift to Minors Act (UGMA) or the Uniform Transfer to Minors Act (UTMA), depending on which law applies in the relevant jurisdiction. The UGMA/UTMA account allows someone to make gifts or transfers of property to a minor without setting up a trust. The transfers made to an account of this type are considered an irrevocable transfer to the minor in whose name the account is registered.
Contribution Limit Up to $2,000, per child (under age 18) can be made by contributors with a modified adjusted gross income of no more than $190,000 if filing jointly or $95,000 for single filers. The maximum is reduced and gradually phased out for those with a modified adjusted gross income between $190,000 and $220,000 (joint filers) or between $95,000 and $110,000 (single filers). Those who exceed these income limits are not eligible to make contributions. The contribution limit varies by state or institution (a plan cannot accept contributions that exceed the amount necessary to provide for the beneficiary's qualified expenses.) For State of Nebraska plans, the total balance of all accounts for the same designated beneficiary cannot exceed $360,000, regardless of the account owner(s). None
Financial Aid Impact The Coverdell ESA is treated as an asset of the account owner. If the account owner is the student, this has a high impact on financial aid eligibility. How the plan might affect financial aid depends on whether it is owned by the student or the parent. Please see the FinAid website for more specific information. For financial aid purposes, custodial accounts are considered assets of the student. This means there is a high impact on financial aid eligibility.
Tax Treatment
Tax-deferred growth.
Earnings are free from federal (and possibly state) income taxes.
Since 2008, the first $900 of a child's investment income is tax free and the next $900 is taxed at his or her own rate, but any unearned income in excess of $1,800 is taxed at the parents' presumably higher tax rate.
Earnings are tax free if used for eligible education expenses, which include room and board, tuition, books, supplies and equipment, academic tutoring, and special needs services. Withdrawals are federal-income-tax-free if used for qualified higher education expenses.
There are potential gift tax and estate tax savings.
In 2008, the kiddie tax was expanded to include dependents under 19 and dependent full-time students under 24. Children who provide more than half of their own support are not affected by this kiddie tax change.
The availability of such tax or other benefits may depend on meeting certain requirements.

Risk Disclosures

Investing involves risk, including potential for loss.

More information on the four Nebraska 529 plans can be found at the Nebraska State Treasurer's website.

AP2013/11/2043

Not FDIC Insured

  • No Bank Guarantee
  • May Lose Value