Glossary

Uniform Gift to Minors Act. Laws adopted by most states allow an adult to contribute to a custodial account in a minor’s name without having to establish a trust or name a legal guardian. Thus, minors can have securities bought and money invested in their names, but the custodian is responsible for managing the funds in the account. Once the minor reaches the age of majority, he/she has access to the account and can take control of the funds. The assets are the legal property of the minor, and the custodian has a duty to manage the account for the benefit of the student. All withdrawals from the account are taxed at the minor’s rate. Putting money into a UGMA account can negatively impact the chances for financial aid since financial aid officers may weigh children’s assets more heavily than parents’ assets.

An independent agency of the Commonwealth of Virginia, with a mission to provide superior, affordable, innovative, tax-advantaged higher-education savings options to help families and others achieve their academic goals.

Taking money out of a 529 account.

A qualified distribution is a withdrawal of funds for 1) the properly documented qualified higher education expenses of the designated student or 2) a qualified rollover to another Qualified Tuition Plan (529 Plan).

A non-qualified distribution is a withdrawal made for any reason other than the two described above. Withdrawals that are non-qualified distributions will be subject to federal income tax on the earnings and Virginia state income tax on the earnings for Virginia taxpayers, as well as a federal penalty of 10 percent of the earnings, reported on the taxpayer’s federal tax return. Virginia taxpayers will need to recapture any deductions they have previously taken on the amount of the withdrawal if it is a non-qualified distribution.

A tax–advantaged higher-education savings program designed to help families meet the ever–rising cost of higher education through planning and saving in a variety of investment options and programs.