Illinois state treasurer Michael Frerichs announced this month that fees are going down and investment selection is improving in some of the states 529 college savings plans.
529 plans are offered on a state by state basis and allow families to put away money for college and avoid paying state or federal income taxes when the money is withdrawn for eligible college expenses. Illinois residents also receive a state income tax deduction for contributions up to $20,000 for joint filers. This is worth $750 in income tax savings based on today’s tax rates. This is a significant benefit that families can benefit from annually.
Illinois has two 529 investment plans: Bright Start and Bright Directions. Bright Start has the option to invest directly or with the assistance of an advisor. Bright Directions is only available through a financial advisor.
The changes made by Illinois will result in the advisor-based Bright Start plan merging into the Bright Direction plan. Union Bank and Trust will be the sole manager for advisor-based 529 plans. The management fees will be reduced by about 50% while investment options are expanded.
After the changes take place in July only the Bright Directions 529 plan will have an option to invest with an advisor. Accounts that are currently with the Bright Start Advisor plan will automatically transition to the Bright Directions Advisor plan. Account holders are not required to take any action. The direct investment option with Bright Start will not be impacted by these changes. Bright Directions does not have an option to invest directly.
Please don’t hesitate to call us at 847-934-0010 or emailwith any questions.
Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.