Staff Contributor

What is the Utah Educational Savings Plan (UESP)?

The UESP is a tax-advantaged college savings plan sponsored by the state of Utah. Like most 529 plans, contributions grow tax-free, and qualified withdrawals used for educational expenses are exempt from state taxes. Here's why the UESP is a great fit for divorced or separated parents:

• No Residency Requirement to Contribute: Both parents can contribute to the UESP regardless of where they live in the U.S.
• Nationwide Flexibility: Funds can be used at any accredited educational institution, in-state or out-of-state, giving your child maximum college choice.
• Multiple Contribution Options: Each parent can contribute according to their financial situation, as agreed upon in court orders or separate agreements.

 

Managing a Utah Educational Savings Plan as Co-parents

There are two main ways divorced or separated parents can manage a UESP for their child:

• Separate Accounts: Each parent can open their own UESP account naming the child as the beneficiary. This allows for independent control over contributions and withdrawals.
• Joint Ownership Not Available: Unlike some states, Utah doesn't allow joint ownership of 529 plans. However, one parent can be the account owner while the other contributes.

 

Important Considerations for Co-parents

• Open Communication is Key: Discuss contribution amounts, investment strategies, and beneficiary designations openly with your co-parent to avoid future disputes.
• Legal Agreements: Consider including specific details about the UESP in your divorce decree or a separate agreement for clarity.
• Tax Implications: Be aware of tax implications for contributions and withdrawals, especially if one parent contributes more than the other. Consulting a financial advisor can be helpful.

 

UESP vs. Other States' 529 Plans

While the UESP offers significant benefits, comparing it with plans from other states, especially if your child might attend college out-of-state, is prudent. Here's a quick comparison of Utah with 5 other popular 529 plans, including neighboring states Colorado and Idaho:

State	Investment Options	State Tax Benefit	Additional Benefits
Utah	Various Options	Up to $3,000 tax credit	None
Colorado	Variety of Options	In-state income tax deduction	None
Idaho	Vanguard Target-Date Funds	Up to $3,000 tax deduction	None
California	Multiple Portfolio Options	Up to $2,500 tax credit	Can be used for private K-12 tuition
New York	BlackRock Target-Date Funds	Up to $10,000 tax deduction	Can be used for K-12 tuition up to $10,000/year

 

Alternatives to 529 Plans for Divorced Parents

While 529 plans offer tax advantages, they may not be the only option for divorced or separated parents saving for their child's education. Here are a few alternatives to consider:

• Custodial Savings Accounts (UTMA/UGMA): These accounts allow you to invest on a minor's behalf, but funds can be used for any purpose, not just education. Earnings may be taxed.
• Savings Accounts: A regular savings account won't offer tax benefits, but it can be a good option for short-term savings goals.

 

Conclusion

The Utah Educational Savings Plan empowers divorced or separated parents to build a secure future for their child's education. By understanding the UESP's features, comparing it with other options, and considering alternative savings vehicles, you can ensure your child has the financial means to pursue their educational dreams.

Remember, consulting with a financial advisor can help you develop a personalized college savings plan tailored to your specific needs and goals.

Warning:  This post is neither financial, health, legal, or personal advice nor a substitute for the advice offered by a professional. These are serious matters, and the help of a professional is recommended as it can impact your future.