Encouraging children to dream big and helping families prepare for those big dreams are at the heart of the Nebraska Educational Savings Trust (NEST), a division of the Nebraska State Treasurer’s Office.
NEST is Nebraska’s state-sponsored, tax-advantaged college savings program.
By opening a NEST college savings account yet this year—or by making an additional contribution to an existing account—Nebraskans can receive significant tax benefits.
An account owner—either single or a married couple—who contributes to a NEST plan and files Nebraska state income tax can deduct up to $5,000 of contributions per year or $2,500 per year if married filing separately. To qualify, the contribution must be completed online or postmarked no later than Dec. 31.
Investment and interest earnings on NEST accounts are not subject to federal or Nebraska state income taxes if the money is ultimately used for qualified higher education expenses.
NEST account owners also can take advantage of the annual federal gift tax exclusion—up to $14,000 per beneficiary—by contributing to a NEST account before year end.
Much of that will change soon, however. Beginning in 2014 for taxes due in April 2015, account owners will be able to deduct $10,000 for a single person or a married couple filing jointly or $5,000 if married as a single filer. The increased income tax deduction is the result of LB 296, passed by the Nebraska Legislature in 2013. The measure was introduced by Sen. Galen Hadley of Kearney and was made a priority bill by Sen. Lydia Brasch of Bancroft.
NEST savings accounts can be used at institutions of higher education throughout the United States and abroad. Money in the savings accounts can be used to pay for qualified education expenses, including tuition, books and some board and room expenses associated with community colleges, technical colleges, four-year colleges and master’s degree or professional degree programs. Accounts can be established by parents, grandparents, other relatives or family friends, or even by the adult beneficiaries themselves who plan to go back to college to finish degrees or start anew.
We have one of the best college savings plans in the country, and with the passage of this new legislation our NEST plans have become even stronger. Nebraska families now have additional incentive to save for higher education—one of the best lifetime investments a family can make. We are proud of our NEST college savings plans and the value they provide for families looking for responsible and effective ways to save for college.
Nebraska’s 529 college savings program has experienced significant growth during the past several years under the program management of First National Bank of Omaha. State-sponsored 529 programs take their name from Section 529 of the U.S. Internal Revenue Code. The tax-advantaged investment plans are designed to encourage saving for the future higher education expenses of a designated beneficiary.
The Nebraska Educational Savings Trust is made up of four savings plans to match investors’ preferences and savings strategies—the NEST Direct College Savings Plan, the NEST Advisor College Savings Plan, the TD Ameritrade 529 College Savings Plan and the State Farm College Savings Plan. All investments are approved by the Nebraska Investment Council.
Since January 2011, assets in NEST have grown from $2.4 billion to more than $3.2 billion, and 60,250 new accounts have been opened, bringing the total number of accounts in NEST to more than 208,000. More than 59,000 of those are owned by Nebraskans.
The Nebraska college savings plans also have received national recognition the past three years. Most recently, two of Nebraska’s four plans received Bronze ratings from the independent rating firm Morningstar. Previously the plans were ranked Neutral. “Altogether, this is a good choice for Nebraska residents,” Morningstar said in its analysis of the NEST Direct plan in October 2013. “Nebraska residents should give this plan a look,” Morningstar said about the NEST Advisor plan.
NEST also was recognized for its fund selection by “Kiplinger’s Personal Finance” magazine, both in 2011 and 2013. “Kiplinger’s” did not rate college savings plans in 2012. Also, the NEST Direct and NEST Advisor plans received the top five-cap rating from the well-respected website Savingforcollege.com in 2012, the latest year for which those ratings are available.
We are very proud of the high regard with which the Nebraska Educational Savings Trust is held in the college savings industry and by our account owners. We have been working continually to improve our college savings program, and recent developments, including the national ratings, the growth in accounts and the improved tax advantages, affirm that our hard work, dedication and attention to detail are making a difference.
We are continuing our efforts to provide residents of Nebraska, as well as families across the United States, with sound, wise investment choices for saving for college and with many opportunities for families to start saving when children are young and for young people to learn more about personal financial responsibility.
We appreciate all the families in Nebraska and across the nation who have put their trust in our excellent 529 college savings program. We work hard every day to make sure our plans are worthy of that trust.
Excellent customer service is one of the hallmarks of the Nebraska Educational Savings Trust. A variety of investment choices that appeal to a broad range of investors and investment strategies also contributes to the success of the program.
In addition, we are continuing to expand our scholarship offerings by establishing new contests and incentives for young writers and artists and by participating in outreach events across the state to build awareness and promote our products.
Setting up a NEST college savings plan is easy and takes less than 10 minutes. Descriptions of the four plans can be found at the Treasurer’s Office website at www.treasurer.org. Click on the College Savings tab and then on the About the Plans link. Follow these five steps:
1. Choose the plan that best suits the investor’s needs.
2. Read the Program Disclosure Statement.
3. Choose an investment option.
4. Gather required information including street addresses, birth dates, Social Security or taxpayer identification numbers and bank account numbers.
5. Enroll online or download the enrollment form for the NEST Direct and Advisor plans and the TD Ameritrade plan. Contact an agent to enroll in the State Farm College Savings Program.