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Most investors find 529 plans to be somewhat complicated. Here are answers to some common questions. For answers to even more questions, visit our FAQs page.  You can also always speak to your financial or tax advisor for more clarification.

 

Q. What is a 529 College Savings Plan?
A. 529 College Savings Plans are designed to help individuals and families save for college in a tax-advantaged way. The plans are named for Section 529 of the Internal Revenue Code.

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Q. Who can open an account in the OklahomaDream 529 Plan?
A. The OklahomaDream 529 Plan is intended for residents of Oklahoma. The beneficiary may be your child, your grandchild, another relative, such as a niece or nephew, your spouse, or even someone unrelated to you. You can even open an account for yourself. The account owner can change the designated beneficiary at any time without any cost, tax, penalty or fee but only to any member of such beneficiary’s family including step-siblings, first cousins or even in-laws.

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Q. How can I use the money in my account?
A. You can use the money in the account when needed to pay for the "qualified higher education expenses," as defined in the Internal Revenue Code of 1986 (A/K/A, "Section 529"), of the person who is the Designated Beneficiary of the account.

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Q. What are qualified expenses?
A. In general, tuition, room and board, books, equipment and fees necessary to attend an institution of higher education are considered qualified higher education expenses. Qualified higher education expenses also include expenses of a special needs beneficiary that are necessary in connection with his or her enrollment or attendance at an "eligible educational institution" as defined in the Code.

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Q. Can I use my account to pay for any college?
A. Yes. You can get the full benefits from the Program if your Designated Beneficiary attends any accredited and eligible educational of higher education that is eligible to participate in certain federal student aid programs.

This might be a college or graduate or professional school, or a post-secondary vocational or trade school, private or public, in your state or out-of-state.

Please Note: If you use the money for any other purpose, including paying for costs associated with a non-accredited institution, you will not qualify for favorable tax treatment, and the earnings portion of your withdrawal for such purpose will be subject to applicable federal and state income tax and an additional 10% federal tax.

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Q. What if my beneficiary does not go to college or if the account has more money than I need?
A.You can do a number of things: a) use the funds for your designated beneficiary’s graduate or professional school expenses, b) designate a new beneficiary who is a member of the designated beneficiary’s family, c) close the account by withdrawing all the funds (any gains subject to federal and state income tax and 10% penalty — account owner may be obligated to add the deductions back into your Oklahoma taxable income), or d) leave the account open indefinitely, until you determine the proper course of action. Note that the normal 10% federal penalty and tax on the earnings withdrawn and the obligation to add the deductions taken back into your Oklahoma taxable income is not assessed if you terminate the account because the beneficiary has died or is disabled, or if you withdraw funds not needed for college because the beneficiary has received a scholarship equal to or less than the amounts withdrawn.

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Q. How much can I invest in an account?
A.The balance limit of 529 plans varies by state. The OklahomaDream 529 Plan maximum contribution is $300,000 per account. You should also keep in mind federal gifting tax laws. Please reference the Plan Disclosure Statement for additional details. Once the account is valued at such maximum level, further contributions are prohibited though the account can grow indefinitely.

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Q. How often can I change how my account is invested?
A. You may reallocate the existing assets in your Account - to one or more other Investment Portfolios twice every calendar year.

Alternatively, you may reallocate your investment options whenever you change the Account’s Designated Beneficiary.

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Q. Can I transfer my 529 account sponsored by another State, Coverdell ESA (Education Savings Account) or qualified Series EE and I U.S. Savings Bonds into a 529 plan tax-free?
A. Yes, most rollovers of this nature are not considered taxable events. If you are rolling over a 529 account, you may be able to deduct that rollover from your Oklahoma taxable income up to the limitations described on the Plan Details page. In the case of EE or I U.S. Savings Bonds there may be ownership issues or a “phaseout” of the favorable tax treatment, depending on your income. You should speak to your financial advisor or your tax advisor.

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Q. What are the gift tax advantages of an account?
A. Normally, a gift of more than $14,000 to a single person in one year is subject to federal gift tax. With the Program, an individual can potentially contribute up to $70,000 (and married couples can potentially contribute up to a total of $140,000) to an Account for a particular Designated Beneficiary in one year without triggering the tax. To do this the contributor must elect to treat the entire gift as a series of five equal annual gifts. The five-year prorating is elected by filing a gift tax return for the year in which the gift is made. If the Donor dies before the start of the fifth year, a portion of the contribution must be added back to the Donor's estate for tax purposes. You should consult with a tax advisor regarding the gift and estate tax consequences of contributing to (or making any other transaction with respect to) an account.

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