Scholar'sEdge vs. Other Savings Options

Scholar'sEdge

Advantages Possible Limitations
  • Account owner retains control of assets
  • Earnings grow tax deferred
  • Qualified withdrawals are free of federal taxes1
  • State tax deductions for New Mexico residents
  • Estate and federal gift tax benefits
  • High contribution limits
  • No income or age restrictions
  • Can be used for broad range of higher education costs
  • Flexible beneficiary designation
  • Portability—Smay transfer assets to a different 529 plan
  • Investment options potentially limited to the funds made available through Scholar'sEdge
  • Nonqualified withdrawals are subject to ordinary federal and any applicable state income tax, an additional 10% federal tax and the recapture of all previous New Mexico tax deductions taken for contributions to an account
  • Assets may only be reallocated once per calendar year or upon a change in beneficiary

Coverdell Education Savings Account

Advantages Possible Limitations
  • Qualified withdrawals are free of federal taxes
  • Flexible beneficiary designation
  • Can be applied to elementary, secondary and higher education expenses
  • Money can be gifted to child who can open own account, bypassing income restrictions
  • Investment flexibility
  • Considered a parent asset for federal aid purposes if parent is the owner
  • Income restrictions
  • $2,000 annual contribution limit2
  • 10% tax penalty on nonqualified withdrawals
  • Age restriction
  • Contributions for students 18 or older are not allowed except for special needs students
  • Withdrawals must be made by student's 30th birthday and/or certain penalties may apply (except for special needs students)

UGMA/UTMA Account

Advantages Possible Limitations
  • Portion of earnings taxable at student's rate
  • No limit on amount transferred to account
  • Investment flexibility
  • Unrestricted use of assets, provided it is for the benefit of the minor
  • Considered student assets for financial aid purposes
  • Adult loses control of assets when child reaches legal age
  • Annual transfers in excess of $13,000 subject to gift tax
  • Irrevocable gift and may not be transferred to anyone else
  • No tax deferral on earnings

1. Because of the special tax benefits for New Mexico state taxpayers, Account Owners who are New Mexico residents may not effect any type of withdrawals or rollovers (other than withdrawals as a result of death or disability of a Designated Beneficiary or the death of the Account Owner) unless their account has been open for at least one year.
2. Scheduled to sunset after the year 2010.

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This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice, or for use to avoid penalties that may be imposed under U.S. federal tax laws. Contact your attorney or other advisor regarding your specific legal, investment or tax situation.

Scholar's Edge® is operated as a qualified tuition program offered by The Education Trust Board of New Mexico and is available to all U.S. residents. OFI Private Investments Inc., a subsidiary of OppenheimerFunds, Inc., is the program manager for Scholar's Edge and OppenheimerFunds Distributor, Inc. is the distributor of Scholar's Edge. Some states offer favorable tax treatment to their residents only if they invest in the state's own plan. Investors should consider before investing whether their or their 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 and should consult their tax advisor. These securities are neither FDIC insured nor guaranteed and may lose value.

Before investing in the Plan, investors should carefully consider the investment objectives, risks, charges and expenses associated with municipal fund securities. The Plan Description contain this and other information about the Plan, and may be obtained by asking your financial advisor, by visiting https://www.scholarsedge529.com/OFI529/ or calling 1.866.529.SAVE (1.866.529.7283). Investors should read these documents carefully before investing.

Scholar's Edge® is distributed by OppenheimerFunds Distributor, Inc. Member FINRA, SIPC
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