Withdrawals From an Account

How Is a Withdrawal From an Account Requested?
What Constitutes a Qualified Withdrawal?
Which Schools Are Eligible Institutions?
Can Withdrawals Be Made for Other Purposes?
What Are the Exceptions to the Federal Penalty Tax?
Can an Account Be Rolled Over?
What Happens to an Account if the Beneficiary Does Not Attend College?
How Is an Account Closed?

1. How Is a Withdrawal From an Account Requested?

The account owner or a custodian (under a state UGMA/UTMA) must submit a Withdrawal Request form

2. What Constitutes a Qualified Withdrawal?

Qualified withdrawals are used to pay for:

Higher education costs (tuition, fees, books, supplies, and equipment)
Room and board expenses

3. Which Schools Are Eligible Institutions?

Public and private colleges and universities
Vocational, trade, technical, and professional institutions
Select foreign schools
For a list of eligible schools, click here

4. Can Withdrawals Be Made for Other Purposes?

Earnings on nonqualified withdrawals are subject to income tax and a 10 percent federal penalty tax

5. What Are the Exceptions to the Federal Penalty Tax?

The additional 10 percent federal penalty tax does not apply to all nonqualified withdrawals. Generally, nonqualified withdrawals made on account of the following are not subject to the 10 percent federal penalty tax:

The death of the beneficiary
The disability of the beneficiary
If the beneficiary receives a scholarship
If a Hope Scholarship Credit and/or Lifetime Learning Credit is allowed to any person for payment of the Beneficiary's Qualified Higher Education Costs, the Earnings Portion of the part of the Nonqualified Withdrawal equal to such expenses will not be subject to the penalty tax.
If the beneficiary attends the United States Military Academy, the United States Naval Academy, the United States Air Force Academy, the United States Coast Guard Academy, or the United States Merchant Marine Academy

You should consult your tax advisor regarding the application of any of the above exceptions. See “Exhibit B − Tax Information” in the Program Disclosure Statement.

6. Can an Account Be Rolled Over?

Rollovers to other 529 programs are allowed
Withdrawals that are redeposited to a 529 program within 60 days are considered qualified rollovers

7. What Happens to an Account if the Beneficiary Does Not Attend College?

A nonqualified withdrawal can be made
The beneficiary can be changed
Funds can be transferred to an account whose beneficiary is a member of the current beneficiary’s family
Funds may be left for future use by the beneficiary or a member of the beneficiary’s family

8. How Is an Account Closed?

The account owner or a custodian (under a state UGMA/UTMA) must submit a Withdrawal Request form
No surrender or withdrawal fee will apply

IRS CIRCULAR 230 NOTICE: To the extent that this message or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

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.