529 Plans vs. Custodial Accounts: Which Is Right for Your Child’s Education Planning?

When it comes to your child’s education planning, making the right financial choice today can significantly impact their future opportunities. For families in Miami, South Florida, and across the U.S., two of the most common options for saving for college and other education expenses are 529 plans and custodial accounts. Both accounts offer benefits, but they differ in flexibility, tax advantages, and long-term impact.

At Frezzotti Financial Services, we help parents, guardians, and grandparents across Miami and throughout the country compare these options and create a customized strategy that aligns with their education funding goals.

Understanding 529 Plans: A Tax-Advantaged Way to Save

A 529 plan is a tax-advantaged savings account specifically designed to cover qualified education expenses. These include tuition, fees, room and board, books, and even up to $10,000 in student loan repayment. There are two types of 529 plans: college savings plans and prepaid tuition plans.

For families in South Florida looking to grow their savings over time, a college savings plan is often the preferred route. Contributions grow tax-deferred, and withdrawals are tax-free when used for qualified education expenses.

Key benefits of 529 plans for Miami and South Florida families include:

• Tax-free growth and withdrawals for qualified education expenses

• High contribution limits—often over $300,000, depending on the state

• Control over the funds remains with the account holder (usually the parent or grandparent)

• Low impact on financial aid compared to custodial accounts

• National flexibility—use funds for eligible institutions across the U.S. and even abroad

At Frezzotti Financial Services, we guide clients through 529 plan selection and investment strategies based on their timeline, risk tolerance, and long-term education planning needs.

Exploring Custodial Accounts: Broader Use, Less Tax Efficiency

Custodial accounts, including UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act) accounts, are another way to save for your child’s future. These accounts are opened in the child’s name, with an adult acting as the custodian until the child reaches the age of majority—18 or 21 in most states.

Unlike 529 plans, custodial accounts can be used for any purpose that benefits the child, not just education. This provides more flexibility, but it comes with trade-offs.

Pros and cons of custodial accounts for education planning:

• Flexibility: Funds can be used for anything from school expenses to a first car or business venture

• Ownership: The assets legally belong to the child once they reach adulthood

• Less favorable tax treatment: Earnings above certain limits may be taxed at the parent’s rate

• Greater impact on financial aid, as the assets are considered the child’s

In Miami and across South Florida, custodial accounts can be a strong choice for families looking for flexibility beyond education—but they require thoughtful consideration around tax implications and future ownership.

Which Account Is Right for Your Child’s Education Planning?

There’s no one-size-fits-all answer when it comes to your child’s education planning. The decision between a 529 plan and a custodial account often depends on your priorities, tax situation, and how much control you want over how the money is ultimately used.

If your goal is to maximize tax-advantaged savings specifically for tuition and other qualified education expenses, a 529 plan may offer the most advantages. For South Florida families who value flexibility and want to give their children a financial head start in a broader sense, a custodial account might make more sense.

Keep in mind this overview does not outline all investment options available for college-funding solutions. This is not a solicitation that any particular investor should open a specific account type.

How Frezzotti Financial Services Can Help

Based in Miami and proudly serving clients across South Florida and nationwide, Frezzotti Financial Services offers personalized guidance for your child’s education planning. We work with families to:

• Compare 529 plans and custodial accounts based on their financial goals

• Build long-term education savings strategies tailored to each child’s timeline

• Explore multi-generational planning options for grandparents and relatives

• Provide national support for clients relocating or with students attending school out of state

Whether you’re in Coral Gables, Fort Lauderdale, or anywhere else in South Florida, we offer virtual consultations to make education planning as convenient as possible.

Start Planning Today

Your child’s education is one of the most important investments you’ll make. With the right tools and strategies, you can build a plan that supports their ambitions—whether they stay close to home in Miami or pursue opportunities across the country. 

Investing involves risk and you may incur a profit or a loss. Please carefully consider investment objectives, risks, charges, and expenses before investing. 

Contact us today to schedule a personalized consultation for your child’s education planning. Together, we’ll take the next step toward their future.