One provision of the federal tax code sounds almost too good to be true: It allows you to set up investment accounts to fund a beneficiary’s college education and exempts the investment earnings as well as the withdrawals from taxes, while also removing the contributed money from your estate.

Under the 529 plan college savings program—named for the authorizing section of the Internal Revenue Code—you can set up accounts for different beneficiaries outside your estate. In addition, 529 plan accounts have the following advantages over annual gifting:

  • Investment earnings and distributions for college expenses are free of federal tax.
  • You can change the named beneficiaries.
  • You control the disbursements from the accounts.
  • You can accelerate five years of gifting by making one lump-sum gift of up to $70,000 ($140,000 for married couples filing taxes jointly) and do so free of gift tax by filing IRS Form 709.*

Tax-free withdrawals may be used only for qualified higher education expenses (ordinary income taxes and a 10% federally mandated penalty apply on any earnings withdrawn for nonqualified expenses). However, there are no institution or state limits: 529 plan assets can be used at any accredited higher education program in any state and even at some foreign institutions. In addition, there are no income limits restricting access to 529 plans.

Because each investor has a different approach to investing, our 529 plan offering—CollegeBoundfund—provides a suite of investment options, some of which you can customize using combinations of our mutual funds. Specially designed for our program, this menu of options allows you to select the portfolio that best suits both your beneficiary’s situation and your preferred investment approach.

The tax rules are complicated, and their impact on a particular individual may differ depending on the individual’s specific circumstances. Please consult with your legal or tax advisor regarding your specific situation.

*Under an “add-back” rule, if a contributor to a 529 plan elects to treat the gift as having been made over a five-year period and dies during the five-year period, prorated amounts allocable to the years after death are included in the contributor's gross estate for federal estate tax valuation purposes.

You should consider the investment objectives, risks, charges and expenses of CollegeBoundfund carefully before investing. For a free copy of the Program Description, which contains this and other information, visit the Fund’s website at, or call your Bernstein Advisor. Please read the Program Description carefully before you invest.

If you are not a Rhode Island resident or if you have taxable income in another state, please note that depending on the laws of your or your beneficiary’s home state, favorable state tax treatment or other benefits offered by such home state for investing in 529 college savings plans may be available only for investments in the home state’s 529 plan. Any state-based benefit offered with respect to this plan should be one of many appropriately weighted factors to be considered before making an investment decision. Please consult your financial, tax, or other advisor to learn more about how state-based benefits (including any limitations) would apply to your specific circumstances. You may also wish to contact your home state’s or another state’s 529 plan to learn more about its features, benefits and limitations before investing. Statements in this material concerning taxation are not offered as individual tax advice.

The investments in CollegeBoundfund are not guaranteed by the State of Rhode Island, the Rhode Island Higher Education Assistance Authority (which established and implemented CollegeBoundfund and makes rules and regulations governing the program), the Rhode Island State Investment Commission (which oversees the investments of the assets of CollegeBoundfund), the Federal Deposit Insurance Corporation (FDIC), or any instrumentality thereof. CollegeBoundfund is managed by AllianceBernstein L.P. and distributed by AllianceBernstein Investments, member FINRA.

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