The Maine Women's Journal - Fall 2007

• Tax-deferred growth and withdrawal. Earnings grow tax-deferred and withdrawals are Maine and federal income tax-free when used for qualified higher education expenses.

• Special gifting and tax planning benefits. Assets in the NextGen account are considered completed gifts and, therefore, not part of a taxable estate.

• Special five-year gift rule. Under a special five-year gift rule, you may be eligible to make a special gift-tax election and make contributions up to $60,000 (or $120,000 for married couples) for each beneficiary in a single year without federal gift tax consequences. This makes the NextGen account an effective way to reduce taxes on your estate while making a gift to someone special.

• Account owner retains control over the use of the assets, and can change the account beneficiary to a family member at any time. If assets are withdrawn for nonqualified expenses, the earnings portion of the withdrawal is subject to state and federal income taxes, plus a 10% penalty on the "earnings" portion of the withdrawal.

Additional NextGen Advantages

The NextGen College Investing Plan provides several other advantages:

• Pay for the college of your choice. Assets can be used at most U.S. accredited post-secondary institutions, and some foreign institutions.

• Contribution limit. NextGen offers an aggregate contribution limit of $320,000 per beneficiary.

• Flexible and affordable contribution minimums, with convenient automated funding options, including payroll deduction.

• NextGen Matching Grant – If either the account owner or beneficiary is a Maine resident and the account owner meets the current income eligibility requirements, the account owner may apply for a NextGen matching grant.

• Initial Matching Grant: Income eligible Maine residents will receive a one-time $200 grant when opening a new account with a contribution of only $50.


• Annual Matching Grant: NextGen account owners contributing at least $50 in a calendar year to an existing account will receive 50% of contributions for a maximum annual grant for any one beneficiary of up to $200.

• NextGen First Step Grant – NextGen accounts opened for the benefit of a Maine child will be eligible to receive a one-time $50 NextGen First Step Grant prior to the baby’s first birthday, regardless of family income.

• Fee Rebate – An amount approximately equal to the annual Maine Administrative Fee (0.15%) paid during the year will be automatically rebated back to all NextGen accounts with a balance of $1,000 or more for Maine resident account owners and/or beneficiaries.

• Annual Account Fee Waiver – The NextGen annual account fee is waived for account owners and beneficiaries who are Maine residents.

NextGen matching grant income eligibility criteria and applications may be downloaded from www.FAMEmaine.com or by calling FAME at 1-800-228-3734 for more information.

Before investing, you should carefully consider the investment objectives, charges, expenses and risks of investing in the NextGen Plan. You also should consider whether your or the designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s 529 plan. Request a Program Description from your local bank or financial advisor, or call FAME at 1-800-228-3734 and read it carefully.

This article provides information intended to be general in nature; therefore, it is not intended as tax advice and cannot be relied upon for the purpose of avoiding any tax penalties. You should review any planned financial transactions that may have tax, accounting or legal implications with your personal professional advisors.