Frequently Asked Questions

How Do I:

Open an Account?

Contribute to My Account?

Withdraw Money from My Account?

Make Changes to My Account?

Open an Account
You can open an account in one of three ways:

Enroll online

Download an Enrollment Application

Order an Enrollment Kit

Contribute to My Account
You can make a contribution any time online at My Accounts. Funds can automatically be transferred from your bank account on a regular basis using an Automatic Investment Plan (AIP).

Withdraw Money from My Account
You can request a withdrawal online at My Accounts, or you can complete a Withdrawal Request Form and mail it in. Payments can be made directly to the educational institution, account owner or beneficiary. For details, please check the Plan Description and Participation Agreement.

Make Changes to My Account
You can use the account maintenance features at My Accounts to:

  • Change the Beneficiary
  • Change Your Investment Options
  • Add or Change Successor Account Owner
  • Establish, Change or Delete your AIP.
  • Change Your Elected Investment Allocation
  • Change Address or Phone Numbers
  • Alternatively, you can use the Account Maintenance Form to update your account.

 

General

What is a 529 college savings plan?
Named after the Section of the IRS code, state-sponsored 529 plans are investment plans that receive special tax benefits. Also referred to as qualified tuition programs, 529 plans are specifically designed to help families—regardless of income level—save for college expenses, such as tuition, books, and room and board. Investments grow tax deferred, and qualified withdrawals are federal tax free.

Who can invest in LoneStar 529 Plan?
Any U.S. citizen. There are no income or state residency restrictions. Corporations, partnerships, trusts and charitable organizations can also establish and own accounts.

Who can be a beneficiary of a LoneStar 529 Plan account?
Any U.S. resident. For instance, you can set up an account for your child, grandchild, spouse or someone who is not related to you. If you are planning to attend college or graduate school, you can open an account for yourself.

What if I'm not a Texas resident?
the LoneStar 529 Plan is open to all U.S. citizens without any state residency restrictions.

Does the money have to be used at a college in Texas?
No. The money can be used at any accredited public or private post-secondary institution in the United States and abroad. This includes most two-year and four-year colleges and universities, vocational and technical schools, graduate schools, professional, medical and law schools.

Does my home state offer a similar program?
Many states offer similar college savings programs. You should compare the benefits carefully before choosing a plan. Keep in mind that many plans offer additional state tax or other benefits only to residents of the state offering the plan.

How do I know which schools are eligible?
Most schools assigned a federal school code by the Department of Education are eligible. We suggest you perform a Federal School Code search and confirm with the school.

What are eligible higher education expenses?
Expenses include tuition, books, supplies and equipment required for enrollment. Room and board are also included during the academic year provided the beneficiary is enrolled at least half-time.

How will 529 plan savings affect my child's chances for federal financial aid?
An important factor for determining federal financial aid eligibility is the expected family contribution. When figuring the role of 529 plan assets toward that contribution, the following points are considered:

  • If the child's parent is the account owner, the account assets will be treated as assets of the parent.
    If a dependent child is the account owner, or the beneficiary of a LoneStar 529 Plan account holding assets transferred from a Uniform Gift to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA) account, the account assets will not be counted.
  • What if my beneficiary receives a scholarship?
    If your beneficiary receives a scholarship for higher education expenses, you can withdraw an amount equal to the value of the scholarship from your account(s) or account. Earnings on the amount you withdraw would be taxed at your tax rate but will not be subject to the additional 10% federal tax.

What if my beneficiary does not go to college?
As the account owner, you always have control of your withdrawals. If the beneficiary chooses not to attend college, you have three options:

  • Keep the funds in the account. Since there are no age restrictions on the investments, they will be available in future years if the beneficiary changes his or her mind about school.
  • Change the beneficiary. You can change your beneficiary at any time, provided that your new beneficiary is a qualified family member. You should consult your tax advisor to determine whether this may create a taxable gift.
  • Make a nonqualified withdrawal. Earnings will be subject to federal income taxes and any applicable state income tax, as well as an additional 10% federal tax.

How does the LoneStar 529 differ from a Coverdell Education Savings Account (formerly known as an Education IRA)?
Coverdell Education Savings Accounts offer similar tax advantages, but contributions are limited and may not be sufficient to adequately fund a college education. In addition, Coverdell accounts restrict who can contribute based on income levels.

Contributions and Withdrawals

What is the minimum initial investment? What's the maximum?
You can open a LoneStar 529 Plan account with as little as $25, and subsequent contributions can be as small as $15. The maximum account balance is $370,0001.

What if I need to make a withdrawal for non-higher education purposes?
You can take money from your account at any time. However, if the money is not used to pay for qualified higher education expenses, earnings will be subject to ordinary federal income tax and any applicable state income tax, as well as an additional 10 % federal tax.

Investment Options

How do I monitor LoneStar 529 investment performance?
You may view Recent Total Returns, Annual Average Returns or Prices.

What if I want to change my investment option?
Should your goals or needs change, you have the flexibility to rebalance your existing investment options to different portfolios available within the Program. Under federal law you are able to exchange assets in each beneficiary's 529 account twice per calendar year, or whenever you name a new beneficiary. See the Plan Description and Savings Trust Agreement for details.

Rollover and Transfer Questions

Can I open an account in the LoneStar 529 Plan with money from my children's UGMA/UTMA account?
Yes. You must first redeem your current UGMA/UTMA account. 529 accounts opened with assets from a UGMA/UTMA account are subject to additional restrictions. Please see the Plan Description for more details.

Can I roll over money from another 529 plan to the LoneStar 529 Plan?
Yes. You can either make a withdrawal from the other plan and send it to us within 60 days of the withdrawal, or have us obtain the money from the plan directly.

1. If the Account Owner utilizes the special five-year lump sum exclusion and dies within five years of the funding date, the portion of the contribution allocable to the years remaining in the five-year period (beginning with the year after the Account Owner's death) would be included in the Account Owner's estate for Federal estate tax purposes. Clients should consult their tax advisor.