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Planning for future education expenses

Understanding your investing and financing options

To pay for a child's education, parents and families can use a variety of different funding sources. If you are preparing for a future education goal, a Section 529 plan can be a great way to get started. If you have tuition bills that will be due within the current education year, you may also want to consider a payment option such as a Merrill Lynch Loan Management Account® (LMA® Account) from Bank of America.

A Powerful Way to Invest for Future Education Expenses
Section 529 Plans
529 plans provide families a flexible, tax-advantaged way to invest for qualified higher education expenses for a designated beneficiary.1 Withdrawals, including any earnings, are free from federal (and possibly state) income tax when used to pay for qualified higher education expenses, such as tuition and fees, room and board, books, computer or peripheral equipment, computer software, or Internet access and related services, as well as certain expenses associated with special needs beneficiaries. Effective January 1, 2018, you can take a distribution, without federal tax consequences, from a 529 of up to $10,000 per calendar year per beneficiary to help pay for tuition at an elementary or secondary public, private or religious school. State tax treatment may vary. Any U.S. resident with a valid social security number or U.S. taxpayer identification number can open a 529 plan account. So grandparents, parents, aunts, uncles, and other family members can establish accounts. There are no income limits for contributors.

A flexible borrowing option for current tuition needs
LMA® Account
Your LMA Account from Bank of America is a convenient, flexible way to borrow funds. When you open an LMA account, your total available credit will be based primarily on the combined value of all your eligible assets used as collateral. You can easily access funds, generally within one day of approval. Choose from both variable-rate and fixed-rate loans and manage multiple loans through a single account. Best of all, you can continue to manage your brokerage accounts even though you've used them as collateral, subject to certain restrictions, including maintaining sufficient collateral to support your outstanding loans. There is no annual fee and no minimum balance required after your credit line is established, so you can access funds anytime you may need to. Your Merrill Lynch financial advisor can help you open an account and choose the best loan structure for your needs. Note that securities-based financing involves special risks and is not for everyone.2

Three questions to ask your financial advisor

  1. How can I pay for a child's education and still save for my own retirement?
  2. If I need to borrow to help pay tuition bills, what are the pros and cons associated with different borrowing options?
  3. How can I generate liquidity for college expenses while still keeping my investment strategy on track?

Risks of LMA Borrowing
Securities-based financing involves special risks. You should review the LMA Loan Agreement and related documents and disclosures carefully and consult with your own independent tax and legal advisors.

  • A decline in the value of your collateral assets may require you to provide additional funds or securities to avoid a collateral maintenance call. You can lose more funds than are held in the collateral account. The LMA account is a full-recourse loan and you will be liable for any deficiency.
  • The Bank can force the sale or other liquidation of any securities or other investment property in the collateral account and, unless otherwise required by law, can do so without first contacting you.
  • You are not entitled to choose which securities in the collateral account are liquidated or sold.
  • The Bank can change its collateral maintenance requirement at any time without notice to you.
  • You are not entitled to an extension of time to satisfy the Bank’s collateral maintenance requirement.
  • There may be adverse tax or other consequences to you if securities are sold or otherwise liquidated by the Bank.
  • The LMA account is an uncommitted facility, although loans to individuals and trusts may be committed in an amount not to exceed $100,000. The Bank may demand full or partial repayment at any time and any commitment may be immediately terminated.
  • For fixed-rate advances and term loans, principal payments made in advance of the end of the applicable fixed-rate period, whether voluntarily or involuntarily, (due to demand or liquidation by the Bank,) may be subject to a substantial breakage fee as determined by the Bank.
  • Some restrictions on the use of LMA account proceeds may apply under the terms of the loan documents and applicable laws and regulations.

Learn more
Talk to your Merrill Lynch financial advisor about a broad range of education funding options available through Merrill Lynch and Bank of America. You can also read more about Section 529 Plans and LMA Account here at

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1 To be eligible for favorable tax treatment afforded to the earnings portion of withdrawals from Section 529 accounts, such withdrawals must be used for "qualified higher education expenses," as defined in the Internal Revenue Code. The earnings portion of a withdrawal that is not used for such expenses may be subject to federal income tax, including the 10% additional federal tax, as well as state and local income taxes. For distributions after December 31, 2018 qualified higher education expenses include tuition in connection with enrollment or attendance at an elementary or secondary public, private or religious school. These distributions are limited to $10,000 per calendar year, across all 529 accounts for the same beneficiary. State tax treatment may vary.

2 The Loan Management Account (LMA account) is a demand line of credit provided by Bank of America, N.A. Member FDIC. Equal Opportunity Lender. The LMA account requires a brokerage account at Merrill Lynch, Pierce, Fenner & Smith Incorporated and sufficient eligible collateral to support a minimum credit facility size of $100,000. All securities are subject to credit approval and Bank of America, N.A., may change its collateral maintenance requirements at any time. Securities-based financing involves special risks and is not for everyone. When considering a securities-based loan, consideration should be given to individual requirements, portfolio composition and risk tolerance, as well as capital gains, portfolio performance expectations and investment time horizon. The securities or other assets in any collateral account may be sold to meet a collateral call without notice to the client, the client is not entitled to an extension of time on the collateral call and the client is not entitled to choose which securities or other assets will be sold. The client can lose more funds than deposited in such collateral account. The LMA account is uncommitted and Bank of America, N.A., may demand full repayment at any time. A complete description of the loan terms can be found within the LMA account agreement. Clients should consult their own independent tax and legal advisors. Some restrictions may apply to purpose loans and not all managed accounts are eligible as collateral. All applications for LMA accounts are subject to approval by Bank of America, N.A. For fixed-rate and term advances, principal payments made prior to the due date will be subject to a breakage fee.

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