What Are the Federal Gift and Estate Tax Advantages?

For federal gift tax purposes, Contributions to an Account are considered a gift from the contributor to the Beneficiary. If an Account Owner dies while there is a balance in the Account, the value of the Account is not includible in the Account Owner’s estate for federal estate tax purposes. An Account Owner’s contributions to an Account are eligible for the annual gift tax exclusion. For 2008, the annual exclusion is $12,000 per donee. This means that in 2008 you may contribute up to $12,000 to an Account without the Contribution being considered a taxable gift if you make no other gifts to the Beneficiary in the same year. In addition, if your total Contributions to an Account during a year exceed the annual exclusion for that year, you may elect to have the amount you contributed that year treated as though you made one-fifth of the Contribution that year, and one-fifth of the Contribution in each of the next four calendar years. You must make this election on your federal gift tax return Form 709.

This means that you may contribute up to $60,000 to an Account in 2008, without the Contribution being considered a taxable gift, provided that you make no other gifts to the Beneficiary in the same year or in any of the succeeding four calendar years. Moreover, a married contributor whose spouse elects on a federal gift tax return to have gifts treated as “split” with the contributor may contribute up to twice that amount ($120,000 in 2008) without the Contribution being considered a taxable gift, provided that neither spouse makes other gifts to the Beneficiary in the same year or in any of the succeeding four calendar years. The annual exclusion is indexed for inflation and therefore is expected to increase over time. See “Exhibit B – Tax Information.”

Investment Products: Not FDIC Insured. No Bank Guarantee. May Lose Value

The Bright Directions College Savings Program is part of the Illinois College Savings Pool and is designed to qualify as a qualified tuition program under the provisions of Section 529 of the Internal Revenue Code. The Bright Directions 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, and Northern Trust Securities, Inc. acts as Distributor.

You should be aware that other states may sponsor their own qualified tuition plans and may offer a state tax deduction or other benefits that are limited to residents who invest in that plan. You should consult with a tax advisor about state and local taxes.

Withdrawals used to pay for qualified higher education expenses are income TAX-FREE (Federal and State of Illinois). Qualified higher education expenses include tuition, fees, books, supplies and equipment required for enrollment at a qualified institution of higher education. Room and board is considered a qualified higher education expense if the student is enrolled on at least a half time basis.

Every individual's tax situation is different, and it is important to consult a qualified tax advisor regarding the application of the Program’s benefits to your own individual situation.

There is no guarantee that any investment portfolio will achieve its investment goals. The value of an account will go up or down based on the performance of the Portfolio in which the account is invested. When funds are withdrawn, they may have more or less than the total contributions made to the account. Past investment performance is no guarantee of future results.

Investments in the Bright Directions College Savings Program are not guaranteed or insured by the State of Illinois, the Illinois State Treasurer, Union Bank & Trust Company, Northern Trust Securities, Inc., the Federal Deposit Insurance Corporation or any other entity. Investors should read carefully and consider the investment objectives, risks, fees, and expenses contained in the Program Disclosure Statement (issuer's official statement) before investing. The Program Disclosure Statement, which contains additional information about the plan and municipal fund securities, is available from your financial advisor.