529 Illinois College Savings Plan
The Illinois Bright Start Savings Program is a Section 529 Plan which offers multiple investment options to those wishing to save for a college education. The program is managed by OFI Private Investments Inc, which is a subsidiary of OppenheimerFunds, Inc.
The Illinois 529 Plan allows you to save for anyone's college education with only a $25 minimum deposit. The plan offers age based portfolios and choice Based portfolios and investors can choose one or the other or a combination. The age-based portfolios use either a Index Strategy Allocation or an Blended Strategy Allocation. The Index Allocation tries to follow the investment returns of a major index like the S&P 500. Administrative costs are lower here because the funds don't require active management. It's more of a set it and forget it investment. The Blended Allocation uses a combination of the Index and an actively managed portfolio. All of these aged-based portfolios use the premise that the funds should be invested more aggressively while the child is young and move automatically to more conservative investments as the child approaches college age.
As an example, in the Index Strategy Allocation portfolio, the investments for a 0-3 year old would be about 90% in stocks and 10% in fixed income which would drop to about 10% in stocks, 50% fixed income and 40% money market once age 18 has been reached.
If you would prefer to manage your own investments, you have the option of using the choice based portfolios. There are four choices and you can use any combination, so you have amost unlimited variations available to you. The four are Equity Portfolio, Balanced Portfolio, Fixed Income Portfolio and Money Market Portfolio.
The Equity Portfolio is invested 100% into stocks and other equities.The Balanced uses a combination of about 50% equities and the rest in fixed income or money market investments. The Fixed Income is invested about 80% in fixed income and 20% in money markets and as the name implies, the Money Market Portfolio is invested 100% in money market investments. As with most college savings programs, there are no guarantees with the Bright Start 529 Plan and the account value may move up or down depending on the market conditions.
Your investment in the Illinois 529 Plan will grow federal and state tax-deferred. Illinois parents can deduct up to $10,000 per year ($20,000 if married filing jointly) from their Illinois State income tax return. Withdrawals used for qualified educational expenses are Federal and state tax free. Withdrawals from the Illinois Bright Start 529 Plan can also be used for various other educational expenses like room and board, books, supplies and equipment.
The Illinois 529 also offers some estate planning advantages. You can donate up to $13,000 per beneficiary per year without incurring a gift tax. Additionally, you could donate up to $65,000 and elect to prorate it over five years for gift tax exclusion purposes. Your wife can do the same, so you can see that the money moved out of your estate can add up quickly. Perhaps the best part of this is you still maintain full control over the money and can determine when, where and why the money will be spent.
For more information on Illinois's Bright Start Savings 529 plan options, visit http://www.brightstartsavings.com.