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What is the Arizona Family College Savings Program?
The Arizona Family College Savings Program is Arizona’s version
of the savings plans permitted under IRS code section 529. These plans
are designed to encourage individuals to save for the future education
expenses. The Arizona Commission for Postsecondary Education (ACPE)
is the state agency that oversees the program.
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Who can contribute to an account?
Any person who desires to save for qualified higher education expenses,
even for oneself. Once an account is established, anyone can contribute
to that account.
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Who qualifies as a beneficiary?
Any person interested in pursuing post high school training and educational
opportunities may be designated as a beneficiary of an account. Parents
can save for their children. Grandparents can save for their grandchildren.
Aunts and uncles can save for their nieces and nephews. Friends can
save for their friends. You can even save for yourself.
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Is there an application fee for the program?
A one-time application fee of $10 will be applied to each new account.
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Are there tax benefits?
Earnings grow tax-free and beginning January 1, 2002 account holders
will have no federal income taxes on withdrawals used for qualified
higher education expenses. For designated beneficiaries who are Arizona
residents, funds are exempt from state taxation when used to pay qualified
higher education expenses of the designated beneficiary.
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Can the funds be used for any college or university?
In developing the program, flexibility was an important consideration.
Funds from the Arizona program can be used at institutions anywhere
in the country. This includes two-year and four-year public or private
colleges, universities, community colleges, or technical training
schools. To be eligible the school must be accredited by an accrediting
agency that is recognized by the U.S. Department of Education and
meet the federal requirements to participate in federal student aid
programs.
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How can the money in the account be used?
The program is designed to pay for qualified postsecondary education
expenses, including tuition, fees, supplies, room and board, books
and required equipment.
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I have more than one child. Should I establish an account
for each of my children?
Yes. Each account can have only one designated beneficiary. A contributor
also may open an account for one child and, at a later date, change
the designated beneficiary to another member of the former designated
beneficiary's family.
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Is there a maximum account balance limit that can be saved
for the beneficiary?
The State of Arizona has established a maximum account balance limit
for contributions to the account(s) of each designated beneficiary
at seven times the College Board's 500 Independent College Index.
This index is researched and reported annually by the College Board.
Please follow this link to find the current Arizona limit as listed
on the provider choice chart.
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What if the beneficiary for whom I establish the account decides
not to attend college?
If the beneficiary does not attend college or does not finish college
the account owner maintains control of the account. Another member
of the designated beneficiary's family can be designated as the new
beneficiary. Funds may be left in the account for the current beneficiary
in the event he or she returns to school. If the money is withdrawn
and not used for qualified higher education expenses, investment earnings
will become subject to federal and state income tax, and a federal
10 percent penalty will be imposed.
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If I open an Arizona Family College Savings Program account,
will the beneficiary still be eligible for financial aid?
For state financial aid, the balances in an account will not be treated
as income of the parents, nor of the student when determining financial
need. Federal based programs may take the account balance into consideration
as a parental asset when determining eligibility.
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What happens if the beneficiary receives a scholarship, becomes
disabled, or dies?
In the cases named above the account owner may withdraw the assets
in the account without incurring the 10% federal tax penalty applicable
for non qualified withdrawals. Only the assets up to the amount of
the scholarship can be withdrawn without penalty. In all cases the
earnings will be subject to federal income tax, however.
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If I move out of Arizona, what happens to my account?
If you move to another state, you can keep your money invested in
the account and continue to contribute money to the account.
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Are my investments guaranteed?
Investments in an account are neither insured nor guaranteed by the
State of Arizona or the Arizona Commission for Postsecondary Education.
Please contact the individual financial institutions for additional
information.
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Can I "rollover" the account?
An account may be “rolled over” or transferred to another
account within a financial institution in the Arizona Family College
Savings Program or to another provider in the AFCSP (without penalty)
once per calendar year. However, this must be a transfer or “rollover”
not a withdrawal, or it will be deemed an unqualified withdrawal and
be subject to penalties and taxes. You can also “rollover”
your account to another state’s plan, if so desired.
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Are there any estate-planning benefits?
Yes. Currently, you may gift up to $60,000, or $120,000 per couple,
without gift tax consequences if an election is made by you to treat
the gift as being made over a five-year period. Currently, any money
contributed to a 529 Plan is out of the contributor’s estate
for estate tax purposes.
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Can I re-direct investment strategies after I have opened
an account?
According to IRS Notice 2001-55, authority is given to account owners
to change investment strategies one time per calendar year or when
the designated beneficiary is changed.
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Is there a tax benefit for investing in the Arizona 529 Plan?
The tax benefit offers deductions for Arizona taxpayers contributing
to a 529 Plan up to $1500 for married tax filers and $750 for single.
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Do my account balance limitations include account earnings?
Yes and No. In determining if additional contributions can be made
to the account, the earnings are counted. If your previous contributions
and earnings equal or exceed the contribution limit, no additional
contributions can be made. However, once you have made qualified contributions,
you will not be penalized for good investment performance. The account
can grow to any size.
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How do I get started?
The next step involves contacting each of the participating financial
institutions to determine which savings program is best suited for
your investment and the beneficiary.
Contact the individual financial institutions in the Arizona Family
College Savings Program to determine which offerings best meet your
investment goals through returning to the home page.
