College Savings Comparison Chart
As you can see in the chart below, John Hancock Freedom 529 offers unique advantages over some other college savings vehicles.
| John Hancock Freedom 529 | Coverdell ESA (Education IRA) | UGMA/UTMA | Taxable Account | |
|---|---|---|---|---|
| Portfolio management style | Multi-manager or “managing the managers” approach | Self-directed | Self-directed | Self-directed |
| Income limitations | None | AGI limits apply | None | None |
| Maximum yearly contribution per beneficiary (individual contributor) | $12,000 without exceeding the annual federal gift tax exclusion ($60,000 if accelerated over a five-year period.);1 total contributions cannot exceed $320,000 per beneficiary | $2,000; Can contribute to Coverdell ESA in same year as you contribute to 529 plan2 | Unlimited; $12,000 without exceeding the annual federal gift tax exclusion | Unlimited; $12,000 without exceeding the annual federal gift tax exclusion |
| Account earnings | Tax free if used for qualified expenses3 | Tax free if used for qualified expenses | Taxable | Taxable to owner |
| Ability to change Beneficiaries | Yes | Yes | No | Not Applicable |
| Control of Distributions | Account Holder | Account Owner | Custodian; transfers to minor upon reaching age of majority | Account Owner |
| Investment Options | Enrollment-Based Portfolios; Static Portfolios; Lifestyle Portfolios; Individual Portfolios | Range of securities | Range of securities | Range of securities |
| Qualified use of proceeds | Any eligible college, university or graduate school in the U.S.; equipment or services for special needs students | Any eligible college, university or graduate school in the U.S., qualified elementary and secondary school expenses; equipment or services for special needs students | Use for minor4 | Unlimited |
| Penalties for non-qualified distributions | 10% federal penalty assessed on earnings | 10% federal penalty assessed on earnings | None | None |
| Taxation of qualified distributions | Tax-free3 | Tax-free | A portion may be federal tax exempt; some/all income may be taxed at child’s rate | Earnings and capital gains taxed at owner’s rate |
| Ownership of assets for financial aid purposes (may vary with private institutions) | Typically the Account Holder | Account Owner | Student | Account Owner |
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1 The donor must elect that the gift be treated as having occurred over a five-year period in order for it to qualify for the federal gift tax exclusion. If additional gifts are made to the same Beneficiary during this five-year period, a federal gift tax may apply. If the donor dies within this five-year period, a pro rata share will be included in the donor’s estate for federal estate tax purposes. State gift and estate tax laws may vary.
2 Contributions below the $2,000 limit will not trigger excise tax, but gift tax rules still apply. State tax laws may vary.
3 Earnings on non-qualified distributions will be subject to income tax and a 10% federal penalty tax and are taxed at the recipient?s (Account Holder’s or Beneficiary’s) rate. State tax laws and treatment may vary.
4 If used by the custodian before the minor reaches the age of majority, use must be for the benefit of the minor. No restrictions on minor’s use once age of majority reached.