Find answers to some common questions about Bright Start 529 Plans.
Who can open an account?
Accounts can be opened by almost anyone, including individuals, UGMA/UTMA custodians, certain legal entities, or a trust. There are no income or residency requirements.
- How do I open an account?
- Who can be a beneficiary?
Anyone can be named as a beneficiary. However, each account is limited to a single beneficiary.
- Who can make contributions?
Anyone is able to contribute to a Bright Start 529 account.
- How are contributions made?
There are many ways to contribute. Contribute by:
- Sending a check.
- Rolling over funds from an out-of-state 529 plan.
- Set up an automatic investing plan from your bank account on the schedule you select.
- Establishing a payroll deduction at work (check with employer for availability).
- Inviting family and friends to contribute via GiftED.
- Earning reward dollars using your Bright Start 529 Rewards Visa® Card.
- Can I transfer assets from another 529 plan?
Yes. You can complete a rollover form to transfer assets from another 529 plan and gain the benefits of the Illinois state income tax deduction. A same-beneficiary rollover/transfer is allowed once in a 12-month period. Additional transfers are allowed but require a change of beneficiary. There may be potential adverse tax consequences if the transfer or rollover is not a qualified rollover. Investors should consult with a tax advisor.
- Is the Program audited?
Each year an independent public accountant selected by the Program Manager will audit the Plan. The auditors will examine financial statements for the Plan. The Treasurer and State may also conduct audits of the Program and Trust.
- Where can I obtain a copy of the audited financial statements?
You can download a copy of the latest audits here:
- Does the beneficiary have to attend school in Illinois?
No. Many beneficiaries will attend Illinois schools; however, funds may be used at eligible schools nationwide and some foreign schools too.
- Which schools are eligible institutions?
Public and private colleges and universities, vocational, trade, technical, and professional institutions, and even some foreign schools are eligible. They need only meet the accreditation criteria and be eligible to participate in Federal Student Aid programs. Check out a listing of eligible schools from the Department of Education.
- What are qualified education expenses?
Qualified higher education expenses include tuition, fees, books, supplies, and equipment required for enrollment or attendance; certain room and board expenses incurred by students who are enrolled at least half-time; the purchase of computer or peripheral equipment, computer software, or internet access and related services if used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible educational institution; and certain expenses for special needs services needed by a special needs beneficiary.
- How can I request a withdrawal from my account?
- When I withdraw funds for college, what else should I consider?
Make sure you keep receipts and invoices for any qualified college expenses in your tax files. Bright Start does not require any proof of your withdrawals, but you will want to have documentation of your expenses in the event the IRS has questions. We also recommend that you match any withdrawals from your Bright Start 529 account in the same calendar year as you pay the actual qualified college expense.
Checks can be made payable to either the account owner, beneficiary, or school. Keep in mind that the recipient of the withdrawal will receive the 1099-Q tax reporting form regarding the withdrawal. The account owner will receive the 1099-Q for any withdrawals payable to them. The beneficiary will receive the 1099-Q for any withdrawals payable to the beneficiary or the school. As you plan to take withdrawals, keep in mind any potential tax consequences when determining how you would like the check issued.
PLEASE NOTE: The earnings portion of a non-qualified withdrawal is subject to federal and state income tax and 10% federal penalty tax. The amount of any deduction previously taken for Illinois income tax purposes is added back to Illinois taxable income in the event an account owner takes a nonqualified withdrawal from an account or if such assets are rolled over to a non-Illinois 529 plan. If Illinois tax rates have increased since the original contribution, the additional tax liability may exceed the tax savings from the deduction.
Make sure to consult with your tax professional regarding the best strategy when withdrawing funds. Your 529 withdrawals can be tax-free, but you should consider the various federal and state tax credits and deductions available as well. You can use qualified college expenses for one tax credit, deduction, or tax-free 529 treatment. Generally you cannot “double dip” and use the same expenses for multiple tax credits, deductions, and tax-free withdrawal treatments from your 529. Consult your tax advisor for more information or advice.
Recontribution of Refunded Amounts
If a student receives a refund of qualified education expenses that were treated as paid by a 529 distribution, the student can recontribute these amounts into a 529 for which they are the beneficiary within 60 days after the date of the refund to avoid the need to figure the taxable part of the 529 distribution.
- What if my beneficiary does not go to college, or does not use all the funds?
You have several options.
- You can leave the funds in the account in the event your beneficiary (or another member of the family) goes back to school at a later date.
- You can change the beneficiary to another member of the family for their college expenses.
- You can withdraw the funds as a non-qualified withdrawal. The earnings portion (not the amount you contributed) is subject to federal and state income taxes and a 10% federal penalty tax*.
*The amount of any deduction previously taken for Illinois income tax purposes is added back to Illinois taxable income in the event an account owner takes a non-qualified withdrawal from an account or if such assets are rolled over to a non-Illinois 529 plan. If Illinois tax rates have increased since the original contribution, the additional tax liability may exceed the tax savings from the deduction. Please consult with your tax professional.
The Bright Start Direct-Sold College Savings Program is sponsored by the State of Illinois and administered by the Illinois State Treasurer, as Trustee. Union Bank & Trust Company serves as Program Manager. Investments in the Bright Start Direct-Sold College Savings Program are not guaranteed or insured by the State of Illinois, the Illinois State Treasurer, Union Bank & Trust Company, the Federal Deposit Insurance Corporation, or any other entity.
An investor should consider the investment objectives, risks, and charges and expenses before investing. This and other important information is contained in the Bright Start Direct-Sold College Savings Program Disclosure Statement which can be obtained at BrightStartSavings.com and should be read carefully before investing. You can lose money by investing in a portfolio. Each of the portfolios involves investment risks, which are described in the Program Disclosure Statement.
Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s 529 plan.
Not FDIC Insured | No Bank Guarantee | May Lose Value
- How do I open an account?