Personal Investments  / Personal Education Funding

Education Funding

Investment decisions are highly personal. Moreover, planning and saving early is important when it comes to education funding. With extensive expertise and a variety of products, Frost can help you navigate your options to make smart, informed choices so you can reach your savings goals.

529 Plans

529 plans have been a useful tool for education savings for many years. Recently, several modifications have enhanced their benefits when it comes to savings. In addition to earnings not being taxed, withdrawals are tax-free when used for eligible education expenses.

  • Can be used for a wide range of expenses, including K-12 private school or trade school in addition to college tuition
  • Any third party can contribute and there is no annual contribution limit*
  • No beneficiary age restrictions and beneficiaries can be changed
  • Beginning in 2024, any unused funds can be converted to a Roth IRA in the beneficiary's name
Image of child off to school

Coverdell Accounts

A Coverdell education savings account (ESA) helps you save for educational expenses while enjoying similar tax advantages of the 529 plan: Contributions aren't tax deductible, but earnings on growth are. Like 529 plans, Coverdell ESAs can be used to fund any education expense (such as private secondary school) - not just college.

  • Can be used for all educational expenses, starting with kindergarten
  • Contributions must be made in cash and are not deductible
  • Contributions are limited to $2,000 annually
  • Must be used by the time the beneficiary is 30 years old
  • No annual restrictions on changing investment allocation
Image of father with baby

Custodial Accounts

Though not solely intended for educational expenses, custodial accounts (Uniform Gifts to Minors Act, or UGMA; Uniform Transfers to Minors Act, or UTMA) are a tax-preferred way for parents, grandparents and other relatives to transfer assets to a child. When the child turns 18 or 21, depending on the state of residence (21 in Texas), they can use these assets however they wish, including for college.

  • Assets and income are owned by the child, not the custodian
  • Assets and income are taxed at the child's rate (over a certain threshold, they are taxed at the parent's rate)
  • May impact a child's eligibility for financial aid
  • Doesn't have to be used for educational purposes
Photo of grandmother and granddaughter

Who can contribute

529 Plan
Anyone can start contributing to a 529 account
Coverdell ESA
Individuals with annual income less than $95,000, or $190,000 for married couples qualify for max annual contribution
Custodial Account
Anyone can start contributing to a custodial account

Open an account

To open an education savings account, a custodial account or to speak with a Frost wealth advisor about your educational savings goals, give us a call at (888) 268-9202.