RiverSource Coverdell Education Savings Account Set-up Kit

Transcription

1 RiverSource Coverdell Education Savings Account Set-up Kit A tax-advantaged way to save for a child s education Important Notes The features of Education Savings Accounts described in this kit are effective under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). Unless future legislation makes provisions regarding Education Savings Accounts permanent, on December 31, 2010, all rules will revert to what they were in Please consult your tax advisor for details. The Disclosure Statement in this kit provides you with the basic information that you should know about RiverSource Education Savings Accounts. However, the RiverSource Account Application and Education Savings Account Custodial Agreement are the primary documents governing your RiverSource Education Savings Account, and these shall govern in the case of any difference with the Disclosure Statement. Many legal issues concerning the operation of Education Savings Accounts in general and under EGTRRA have not yet been resolved. Also, since the information in this kit is only a summary, it may not cover all the details that could affect your personal situation. Finally, this kit does not address the tax treatment of Education Savings Accounts under state laws, which may vary. Therefore, you should consult your own tax advisor or the IRS if you have any questions about Education Savings Accounts, or about latest developments or state tax treatment of Education Savings Accounts. When used in this kit you or your refers to the person for whom the Education Savings Account is established. This individual is also called the Student. Where the use of you, your, or Student refers to an obligation, responsibility, or duty of the Student related to the Student s Education Savings Account, and the Student has not attained the age of majority in the state of residence, the parent or guardian identified in the Account Application must carry out the obligation, responsibility, or duty on the Student s behalf. Acceptance by the Custodian of contributions to the Account is expressly conditioned on the Parent s assumption of such duties and responsibilities. Saving for Your Child s Education If you re concerned about the skyrocketing cost of education, consider a Coverdell Education Savings Account (ESA) formerly called an Education IRA to supplement the savings you have earmarked for your child s future. The RiverSource ESA offers you a number of key benefits: Another Way to Save An ESA can bring you one step closer to meeting education goals for your child. In addition to college expenses, you can use ESA assets to cover costs associated with primary and secondary education. Tax Savings While contributions are not tax-deductible, earnings in an ESA will accumulate on a tax-deferred basis. Qualified withdrawals for education expenses will be distributed tax-free. Flexibility ESA contributions are not mandatory. Each year, you have the option of whether or not to contribute. The ESA is open to anyone who would like to contribute toward a child s education, including parents, grandparents, other relatives or even friends. Eligibility You do not have to have earned income to contribute to an ESA. However, if you do have earned income, eligibility to contribute is restricted by your Modified Adjusted Gross Income (MAGI)* as shown below: Donor Full Contribution Reduced Contribution May Not Contribute Single or Married Filing MAGI up to $95,000 More than $95,000 Up to MAGI over $110,000 Separately $110,000 Married Filing Jointly MAGI up to $190,000 More than $190,000 Up to $220,000 MAGI over $220,000 * Modified Adjusted Gross Income (MAGI) is determined by adding back any deductible IRA contributions plus other allowable deductions such as tax-exempt interest. Please consult your tax advisor for specific information.

2 Contributions Anyone may open and contribute to an ESA established on behalf of a Student (Beneficiary), as long as the Student is under age 18 at the time of the contribution. The person making the contribution (Donor) can be anyone, including the Student. The Donor does not have to be related to the Student. Donors can contribute up to $2,000 per year to an ESA for the benefit of any one Student. That means contributions can come from more than one Donor, but the combined contribution of all Donors cannot exceed $2,000 for each Student. For example, Jennifer s grandparents contribute $1,500 to an ESA for her benefit. All other contributions made in the same year by any other Donor to this or any other ESA for Jennifer are limited to $500. Jennifer s grandparents may, however, make another contribution of up to $2,000 to an ESA for Jennifer s brother, James. Note that contributions made to a 529 qualified tuition program do not impact a Student s ESA limit you may contribute to both types of college savings vehicles for the same Student without adverse consequences. Once the ESA is established and the Donor has made the contribution, the Donor has no further rights over the account. The Student s Parent or Guardian will have control over the account and can therefore direct investments and transfers. Contributions to an ESA may be made up to April 15 of the following year. All contributions to an ESA are made on an after-tax basis. The ESA grows tax-deferred and will be distributed tax-free for qualified education expenses. Special Needs Students When establishing an ESA, you may designate the Beneficiary as a Special Needs Student meaning a Student who, because of a physical, mental or emotional condition (including a demonstrable learning disability), requires additional time to complete his or her education. Any requirements for being a Special Needs Student specified in any IRS regulations or rulings defining this term must also be satisfied. Special Needs Students are allowed extra flexibility with their ESA. Distributions ESA assets will be distributed to the Student tax-free provided three requirements are met: 1. The amounts withdrawn must be used to cover the cost of qualified education expenses at an eligible education institution. Qualified education expenses include tuition, books, supplies, required equipment, and room and board. Eligible education institutions include most elementary and secondary schools (public, private, or religious), colleges, universities, vocational schools and other post-secondary education institutions. 2. The amount of the withdrawal in a Student s qualified education expenses for that year. 3. The student is under the age of 30 (exceptions apply for Special Needs students). Distributions that do not meet these three requirements may be subject to taxation on earnings and a 10% penalty. The ESA must be distributed by the Student s 30th birthday (except for Special Needs students), or it will be subject to taxation on earnings and a 10% penalty. See Transfers below for information on avoiding tax penalties. Transfers to Another Student If the Student does not use the ESA by age 30, the account may be transferred to another family member who is under age 30 in order to avoid the adverse tax consequences described above. The Student may simply transfer the account to another family member at any time up to the day before his or her 30th birthday. Family members include: the Student s spouse, children and their descendants, stepchildren and their descendants, siblings and their children, parents, stepparents and spouses of all of the above, as well as first cousins. Excess contributions are subject to a 6% penalty tax. Please see the Disclosure Statement for details.

3 Establishing Your Education Savings Account It s easy to establish a RiverSource ESA. All the forms you need are enclosed in this kit. Please read the Disclosure Statement and the Custodial Agreement before completing the forms. Send all completed forms and checks in the pre-paid envelope provided to: RiverSource, c/o Boston Financial, P.O. Box 8041, Boston MA, If you wish to pre-pay the annual custodial fee (applicable on accounts less than $10,000), please include a separate check in the amount of $20, made payable to State Street Bank and Trust Company. If you have any questions regarding the establishment of your RiverSource ESA, please call a representative at 1 (800) , Monday through Friday, 7:00 a.m. to 6:00 p.m. Central time. Donors who are eligible may contribute up to $2,000 per year toward the education of a Student who is currently under age 18. The Student must be under age 30 to initiate a Rollover or Transfer from another ESA. Information must be provided about the Student, including the Student s Social Security number. The Student s Parent or Guardian will control the ESA while the Student is a minor. The Donor is the individual making the contribution to the ESA. Once the Donor has made the contribution, the Donor has no further control over the account unless the Donor is the adult Student or Student s Parent or Guardian. Regardless of who establishes the account, information must be provided in Section 2 of the Account Application about the Parent or Guardian who will control the ESA on behalf of the minor Student. The Parent or Guardian must also complete Section 7 and sign Section 9. Guardians must submit written proof of Guardianship (as defined in he Guardian s state of residence). Special Needs Students If the Student named on your RiverSource ESA Account Application is a Special Needs Student, please complete the Special Needs Student Certification Form and return it with your Account Application. New ESA (For Annual Contributions) 1. Complete the Account Application. You must provide the Student s Social Security number in order to set up an ESA. 2. Make your contribution check payable to State Street Bank and Trust Company FBO Student s Name. The minimum initial purchase per Fund is $1,000, unless you initiate automatic purchases through Invest-A-Check. 3. You must have the minor Student s Parent or Guardian sign the Account Application if you are not the Parent or Guardian. Transfer ESA (Direct transfer from an existing Trustee/Custodian) 1. Complete the Account Application indicating in Section 4 that this is a Transfer. Note: you may only transfer amounts from another ESA; transfers from a Traditional IRA, Roth IRA, or employer-sponsored retirement plan are not permitted. 2. Complete the RiverSource ESA Transfer Form. Rollover ESA (If you are in receipt of ESA assets) 1. Complete the Account Application indicating in Section 4 that this is a Rollover. Note: you may only roll over amounts from another ESA; rollovers from a Traditional IRA, Roth IRA, or employer-sponsored retirement plan are not permitted. Rollovers must be completed within 60 days of receipt of your original ESA distribution. 2. Send a check for the total amount of your rollover made payable to State Street Bank and Trust Company FBO Student s Name. If the transfer or rollover represents a change of account ownership to a different family member, be sure to indicate in Section 4 of the Account Application the relationship of the new Beneficiary to the existing Beneficiary.

4 RiverSource Education Savings Account You may use this Account Application to establish a RiverSource ESA. Make your investment check payable to State Street Bank and Trust Company FBO Student s Name and mail it with this completed application to: RiverSource, c/o Boston Financial, P.O. box 8041, Boston MA IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT: To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. What this means to you: When you open an account, we will ask for your name, street address, date of birth, and other information that will allow us to identify you. We may also ask for a copy of your driver s license or other identifying documents. Failure to provide any required information may result in a delay in processing this application or subsequent transactions, or result in the closing of your account. 1. Student Information (Please Print) o Student is a Special Needs Student (include Certification Form) Your account will be registered as: State Street Bank and Trust Company, Custodian for: Student s Name (First Name) (MI) (Last Name) Social Security Number (Required to open account) Birth Date (MM-DD-YYYY) (Required to open account) Street Address City State Zip Code 2. Parent/Guardian Information (List Only One) o Mother o Father o Guardian (Submit proof of guardianship) Name of Parent/Guardian (First Name) (MI) (Last Name) Social Security Number (Not required) Daytime Phone Street Address City State Zip Code o By checking this box, the Parent/Guardian elects to continue control of the ESA after the Student reaches the age of majority. If the box above is NOT checked, the Parent/Guardian will control the ESA until the Student reaches the age of majority in his/her state of residence, at which time control of the ESA will be automatically transferred to the Student. (See the State Street Bank and Trust Company Education Savings Account Custodial Agreement, Article V.) 3. Donor Information (If Different from Parent) Name of Donor (First Name) (MI) (Last Name) Social Security Number (or Tax ID Number) Daytime Phone Street Address City State Zip Code 4. Type of Education Savings Account o Annual contribution. Check enclosed for $. Contributions may not exceed $2,000 per beneficiary per year. See Disclosure Statement for further details. The minimum initial purchase per Fund is $1,000, unless automatic purchases are initiated through Invest-A-Check (see Section 7). o Transfer of existing ESA. Complete the separate RiverSource ESA Transfer Form. Please note: you may not transfer assets from a Traditional IRA, Roth IRA, or employer-sponsored qualified retirement plan to an ESA. o Rollover of distribution from existing ESA. Check enclosed for $. It has been less than 60 days since I received the distribution from my ESA. See the Disclosure Statement for additional information. If you are transferring or rolling over an existing ESA, check the appropriate box below for the relationship of the Student named above to the Student in the existing ESA. The person named above is the: o Same Person o Child o Sibling o Child of Sibling o Parent o Step-Parent o Step-Child o Spouse of One of the Foregoing o First Cousin o Other 0108 ESA Account Application: Page 1 of 4

5 5. Investment Selection Please see the RiverSource, Threadneedle and Seligman Fund guide for investment options. Fund names and numbers must be entered. If no share class is selected, your application will be rejected and the account not opened. Refer to the Fund prospectus for minimum balance requirements. The minimum initial investment is $1,000 per Fund, unless you initiate automatic purchases through Invest-A-Check (see Section 7). If more than one fund is selected, each fund must have identical registration and class of shares. o Class A Shares o Class B Shares o Class C Shares Provide individual allocation percentages below. Total of all elections must equal 100%. Investment Allocation Please invest in the RiverSource Funds listed below: Fund Name Fund number Amount $ 6. Designation of Successor Student Use the space below to indicate the designated Successor Student for the account. It may be advisable to designate a family member of the Student (see the Education Savings Account Disclosure Statement for a description of qualifying family members) who is the same age or younger than the Student. If the Student dies, and the designated successor is a family member of the Student and is under age 30 (or is a Special Needs Student) at the time of the Student s death, the account may remain an ESA for the benefit of the designated successor (who is thereafter treated as the Student for purposes of administering the Account). Otherwise, the account may not continue to be administered as a tax-sheltered ESA. The Student may change the designation(s) below at any time by filing a new Designation of Successor Student with the Custodian. Any such subsequent Designation will revoke all prior Designations. If the person designated as primary successor does not survive the Student, the account will pass to the alternate successor (if any) named below, if he or she survives the Student. If no designated successor survives the Student, the account will pass to the Student s estate (unless otherwise required under the laws of the state of the Student s residence). If you wish to designate multiple primary or alternate successor students, you may do so by attaching a separate sheet listing the required information about each; distributions to them will be in equal shares unless you specify different proportions. Primary Successor Student s Name (First Name) (MI) (Last Name) Relationship to Student Social Security Number Birth Date (MM-DD-YYYY) Alternate Successor Student s Name (First Name) (MI) (Last Name) Relationship to Student Social Security Number Birth Date (MM-DD-YYYY) 7. Account Options and Services (To Be Completed by Parent/Guardian) A. Telephone Services Election Unless I check the box below, I understand that I or my representative may place the following requests by telephone: Exchanges Address Changes o DO NOT WANT TELEPHONE SERVICES FOR MYSELF OR MY REPRESENTATIVE NAMED IN SECTION 8 OF THIS APPLICATION. ESA Account Application: Page 2 of

6 AUTHORIZATION I understand that the telephone services are optional and that unless I checked the box above, I authorize the Fund(s), all other RiverSource Funds with the same account number and registration that I currently own or in which I invest in the future, and RiverSource Service Corp., to act upon instructions received over the telephone from me or any other person (including the representative named in Section 8 of this application) in accordance with the provisions regarding telephone services as set forth in the current prospectus of each such Fund, as amended from time to time. Any telephone instructions given with respect to this account, and any account into which exchanges are made are hereby ratified, and I agree that neither the Fund(s) nor RiverSource nor State Street Bank and Trust Company (State Street) will be liable for any loss, cost, or expense for acting upon such telephone instructions reasonably believed to be genuine and in accordance with the procedures described in each Fund prospectus, as amended from time to time. Such procedures include the recording of telephone instructions, requesting personal and/or account information to verify a caller s identity, and sending written confirmations of transactions.as a result of this policy, I may bear the risk of any loss due to unauthorized or fraudulent telephone instructions; provided, however, that if the Fund(s) or RiverSource or State Street fail to employ such procedures, the Fund(s) and/or RiverSource or State Street may be liable. B. Invest-A-Check Service (For New Contributions) To start your Invest-A-Check Service, please indicate your selection below and provide your bank information in Section E on page 4. Your account may be established concurrently with the Invest-A-Check Service if the monthly investment option is chosen and you include a check for a minimum of $100, or if the quarterly investment option is chosen and you include a check for a minimum of $250. I authorize RiverSource Service Corp. to draw on my bank account electronically or draw pre-authorized checks (refer to the Fund s prospectus for account minimums), for investment in my fund account(s) as indicated below: Fund Name Dollar Amount Day of Withdrawal* o Monthly o Quarterly o Monthly o Quarterly o Monthly o Quarterly * I understand that if my bank is not an ACH member or if no specific day is selected, my bank account will be debited on the anniversary day, or the prior business day, of my account establishment, for the period designated. By using the Invest-A-Check Service to establish your account, you are agreeing to continue this service until you meet the Fund s minimum investment amount. If you cancel Invest-A-Check prior to meeting the minimum, your account may be subject to closure. If a check is not honored by your bank, or the value of shares in your account falls below the minimum, this Service may be suspended. In the event a check is returned marked unpaid, RiverSource will cancel the purchase, redeem shares in your account in an amount sufficient to reimburse the Fund for any loss it may have incurred, and charge a returned check fee, which will be deducted from your account. This service may be terminated by you or RiverSource at any time by written C. Automatic Dollar-Cost Averaging Service (For Transfers or Rollovers) I authorize RiverSource Service Corp. to withdraw $ (refer to the Fund s prospectus for minimums) from my RiverSource fund account o Monthly o Quarterly to purchase shares of the same class of RiverSource Fund, beginning on the day of (month), (year). I understand that if I exchange Class A or Class C shares of RiverSource, I will be subject to an initial sales charge at the time I purchase shares of another RiverSource fund. D. Reduced Sales Charges (CLASS A AND CLASS C SHARES ONLY) If you, your spouse, or your minor children own shares in other RiverSource mutual funds (non-esa investments included), you may be eligible for a reduced sales charge. Please complete the Right of Accumulation section or the Letter of Intent section below. 1. Right of Accumulation o Please link the tax identification numbers or account numbers listed below for Right of Accumulation privileges, so that this and future purchases will receive any discount for which they are eligible. Tax ID or Account Number Tax ID or Account Number Tax ID or Account Number 2. Letter of Intent o I want to reduce my sales charge by agreeing to invest the following amount over a 13-month period: o Class A: o $50,000 o $100,000 o $250,000 o $500,000 o $1,000,000 o Class C: o $100,000 o $250,000 RiverSource Service Corp. will hold in escrow shares equal to 5% of the minimum purchase amount specified until resolution of the Letter of Intent. If the total amount invested within the 13-month period does not equal or exceed the specified minimum purchase, you will be required to pay the difference between the amount of sales charge paid and the amount of sales charge applicable to the total purchase actually made. Speak with your financial advisor for more information ESA Account Application: Page 3 of 4

7 E. Bank Information (For Invest-A-Check Participants) This bank account information will be used for Invest-A-Check Service (from Section B), if applicable. PLEASE ATTACH A VOIDED CHECK: Tape Voided Check Here We Cannot Establish These Services Without it. 8. Broker/Dealer or Financial Advisor Designation Dealer/Advisor Firm Representative s Name Branch Office Address City State Zip Code Representative s ID Number Representative s Telephone Number Branch Number 9. Signature and Certification I hereby establish a RiverSource Education Savings Account and appoint State Street Bank and Trust Company as Custodian. I understand that if my account is less than $10,000, it will be subject to an annual custodial fee of $20. I have received and read the current Prospectus of each Fund in which I am investing. I have received and read the RiverSource Education Savings Account Disclosure Statement and Custodial Agreement at least seven days before the date of my signature below, and acknowledge that there is no further right of revocation. I agree to be bound by all of the terms and conditions of the Disclosure Statement and the provisions set out in Articles I-X of the Custodial Agreement. I am responsible for determining my eligibility for the type of contribution indicated. I am responsible for the tax consequences of distributions, including rollovers. I certify that the Student is under 18 years old and that all contributions made on the Student s behalf to this or any other ESA(s) do not exceed $2,000 in a single tax year. If this is a transfer or rollover of an existing ESA, the undersigned certifies that the Student is less than 30 years old (or is a Special Needs Student) and that the relationship indicated in Section 4 is correct. I certify that if this is a rollover of an ESA, the assets transferred are the same assets received in the distribution; that no rollover into an ESA has been made within the one-year period immediately preceding this rollover; that such distribution was received within 60 days of making this rollover; and that the Student identified in Section 1 is either the person for whose benefit the prior ESA was maintained or a member of such person s family (within Internal Revenue Code Section 529(e)(2)). X / / Signature of Donor Date If the Donor is someone other than the Student or Parent/Guardian, the Parent/Guardian must also sign this Account Application below and complete Section 7 above. Guardians signing this Account Application must submit written proof of Guardianship. X / / Signature of Parent/Guardian or Student Date If the Student has reached the age of majority in his/her state of residence, he/she may sign this Account Application in lieu of the Parent/Guardian. If you wish to pre-pay the annual custodial fee (applicable on accounts less than $10,000), please include a separate check in the amount of $20, made payable to State Street Bank and Trust Company. ESA Account Application: Page 4 of

8 RiverSource Education Savings Account Special Needs Student Certification Form Use this form to certify that the designated beneficiary (or Student ) of a new or existing RiverSource ESA is a Special Needs Student. A Special Needs Student is defined as a Student who, because of a physical, mental, or emotional condition (including a demonstrable learning disability) requires additional time to complete his or her education; any requirements specified in Internal Revenue Service regulations or rulings must also be satisfied. If the Student is a minor in the state of the Student s residence (or if the Student has reached the age of majority but has not filed a written notice with the Custodian assuming control of the ESA), the Parent or Guardian controlling the administration of the ESA should sign. If the Student controls the administration of the account, the Student should sign. Return this completed form, along with your RiverSource ESA Account Application and any other forms, if applicable, to: RiverSource c/o Boston Financial P.O. Box 8041 Boston, MA Student Information (Please Print) Student s Name (First Name) (MI) (Last Name) Social Security Number Birth Date (MM-DD-YYYY) Street Address City State Zip Code RiverSource Education Savings Account Number 2. Signature By signing this form, I certify that the Student named above is a Special Needs Student (as defined above). I understand that adverse income tax consequences (including possible penalties) may apply for providing false or incorrect information. X / / Signature of Parent/Guardian or Student Date 0108 ESA Special Needs: Page 1 of 1

9 RiverSource Education Savings Account Transfer Form Complete this form if you are requesting a transfer of assets from your current ESA trustee/custodian to RiverSource ESA. You may only transfer from another ESA; transfers from Traditional IRAs, Roth IRAs, or employer-sponsored retirement plans are not permitted. Please return this form, along with your completed Account Application, to: RiverSource c/o Boston Financial P.O. Box 8041 Boston MA Student Information (Please Print) Student s Name (First Name) (MI) (Last Name) Social Security Number (Required) Birth Date (MM-DD-YYYY) (Required) Street Address City State Zip Code 2. Parent/Guardian Information (For Students Under the Age of Majority in Their State; Check One) o Mother o Father o Guardian (Submit proof of guardianship) Name of Parent/Guardian (First Name) (MI) (Last Name) Social Security Number (Not required) Daytime Phone Street Address City State Zip Code 3. Prior Account Information Name of Resigning Trustee or Custodian Street Address City State Zip Code Person to Contact Telephone Number Type of Investment: o Annuity o Mutual Fund o CD, maturity date o Other Account Number 4. Investment Selection Please deposit these assets in my: o New RiverSource ESA. My investment choices are indicated on the attached ESA Account Application. o Existing RiverSource ESA, account number. Please invest in the RiverSource Funds listed below: Fund % Fund % Fund % Fund % PLEASE SELECT ONE: o Class A Shares o Class B Shares o Class C Shares If no class of shares is selected, your application will be rejected and the account not opened ESA Special Needs: Page 1 of 2

10 5. Transfer Instructions To Resigning Trustee/Custodian: I have established an Education Savings Account with the RiverSource family of funds and have appointed State Street Bank and Trust Company as the successor Custodian. I want to initiate a Transfer from the account described in Section 3, which your company holds for me. Please: o Liquidate o all or o part ($ ) of the ESA account above and send the proceeds to RiverSource, c/o Boston Financial, P.O. Box 8041, Boston MA , o immediately or o at maturity. Make check payable to State Street Bank and Trust Company, FBO (Student s Name). I acknowledge that a penalty may apply for early withdrawals from certain types of investments. o Transfer in kind (i.e., re-register) o all or o part ($ ) of my shares of the RiverSource Fund(s) to State Street Bank and Trust Company. If the account described in Section 3 contains shares of the RiverSource family of funds, you may choose to transfer or roll them over in kind. Only RiverSource Funds may be transferred or rolled over in kind; to transfer all other assets, they must be liquidated. 6. Signature If the Student is a minor under the law of the Student s state of residence, the Parent or Guardian must execute this Transfer Form for ESA assets. Signature guarantee may be required by current Trustee or Custodian. By signing below, I authorize and direct the current Trustee or Custodian to make the transfer specified on this form. X / / Signature of Parent/Guardian or Student (If over the age of majority) Date Signed by: o Parent o Guardian o Student (If over the age of majority) Signature Guarantee (Only if required by current Trustee or Custodian) Signature guaranteed by: X / / Name of Bank or Dealer Firm Date X / / Signature of Officer and Title Date Note: Some Custodians and Trustees of ESAs require the completion of their own forms before sending a check to RiverSource. To Be Completed by the RiverSource family of funds: FOR OFFICE USE ONLY DO NOT WRITE BELOW THIS LINE Account Name/Account Number To Resigning Trustee: State Street Bank and Trust Company has established an ESA for the above-named account holder and will accept the transfer of account assets on a fiduciary-to-fiduciary basis. X / / Authorized Signature Date ESA Special Needs: Page 2 of

11 RiverSource Education Savings Account Distribution Form Complete this form if you are requesting a distribution from a RiverSource ESA. Please return this form to: RiverSource c/o Boston Financial P.O. Box 8041 Boston MA Student Information (Please Print) Student s Name (First Name) (MI) (Last Name) Social Security Number (Required) Birth Date (MM-DD-YYYY) (Required) Account Number Fund Name 2. Reason for Distribution (Choose One Only) o Normal Distribution. My distribution will be used for qualified education expenses at an eligible educational institution and does not exceed my qualified education expenses for this year. My distribution will be tax-free and penalty-free. o Mandatory Distribution. I am over age 30 and not a Special Needs Student. I understand that my distributions may be subject to an additional 10% penalty tax imposed by the IRS in addition to ordinary income taxes. o Non-Qualified Distribution. My distribution will not be used for qualified education expenses. I understand that my distribution may be subject to an additional 10% penalty tax imposed by the IRS in addition to ordinary income taxes. (Note: If you are under age 30, you may transfer your ESA balance to another member of your family under age 30 in order to avoid these adverse tax consequences.) 3. Method of Distribution (Choose One Only) o A lump sum distribution, closing the ESA. o A partial distribution of $, or number of shares, from (Fund Name). o Systematic withdrawals based upon a fixed dollar amount $, from (Fund Name). Systematic withdrawals are to be paid: o Monthly o Quarterly o Semi-annually o Annually 4. Payee Information If payee or address is different from the current name and address on file, the signature must be guaranteed. o Payment to be made to me, the Student, using the current name and address on file for this account. o I wish to have the distribution: Mailed to the below-named payee, payee bank, or educational institution for the benefit of the Student. Transferred via Automated Clearing House (ACH) to the below-named payee bank. (Attach a voided check.) Name of Payee or Payee Bank Bank Account Number (if applicable) Street Address City State Zip Code Note: I understand that my bank must be a member of the Automated Clearing House System (ACH) in order to transfer distributions to my bank via ACH. I authorize deposits to the bank account entered above. Connection to my account using the ACH System will be activated approximately 30 days after the application is received by RiverSource ESA Special Needs: Page 1 of 2

12 5. Signature If the Student is a minor under the law of Student s state of residence, the Parent or Guardian must execute this Distribution Form for ESA assets. I hereby elect that the assets held by the Custodian in the above ESA(s) be paid according to the instructions on this form. Additional amounts may be distributed from time to time upon presentation to RiverSource Service Corp. of written instructions in good order. I hereby release RiverSource Service Corp., the RiverSource family of funds and any of their affiliates, and the Custodian, State Street Bank and Trust Company, and indemnify them from any and all claims arising from RiverSource Service Corp. or the Custodian s actions hereunder. Signed by: o Parent o Guardian o Student (If over the age of majority) X / / Signature of Parent/Guardian or Student (If over the age of majority) Date X / / Signature Guarantee Date Signature must be guaranteed if the recipient is not designated beneficiary (Student) or if the beneficiary is under the age of majority in his/her state. In the case of death, the signature above must be guaranteed by a bank, a trust company, a member of a domestic stock exchange, or any other eligible guarantor institution. Notarization is not acceptable. ESA Special Needs: Page 1 of

13 Establishing Your Education Savings Account Disclosure Statement Special Note This Disclosure Statement describes the rules applicable to Education Savings Accounts, which first became available on January 1, These accounts were originally known as Education IRAs but the name was changed to Education Savings Accounts. This Disclosure Statement reflects changes to the tax law rules governing Education Savings Accounts made by the Economic Growth and Tax Relief Reconciliation Act of 2001 ( EGTRRA ), which are effective as of January 1, EGTRRA contains a sunset clause, meaning that, unless future legislation makes its provisions permanent, it will expire on December 31, 2010, and all rules will revert to what they were in Contributions to an Education Savings Account are not taxdeductible to the person making the contribution, but withdrawals that meet certain requirements are not subject to federal income taxes when received. This makes the dividends on and growth of the investments held in an Education Savings Account tax-free for federal income tax purposes if the requirements are met. Traditional IRAs, which have existed since 1975, are still available. Roth IRAs have been available since January 1, Both Traditional IRAs and Roth IRAs provide a tax-advantaged savings vehicle that can be used to save for higher education expenses as well as other needs, including retirement. This Disclosure Statement does not describe either Roth or Traditional IRAs. This Disclosure Statement also does not describe IRAs established in connection with a SIMPLE-IRA program or a Simplified Employee Pension (SEP) plan maintained by your employer. If you wish to receive information about these IRA products, including forms and explanatory materials, or if you need information about pre-egtrra Education Savings Account rules, call the phone number or write the address listed at the end of this Disclosure Statement. Establishing an Education Savings Account This Disclosure Statement contains information about an Education Savings Custodial Account with State Street Bank and Trust Company as Custodian. An Education Savings Account provides several tax benefits. While contributions to an Education Savings Account are not deductible to the contributor, dividends on and growth of the assets held in the Education Savings Account are not subject to federal income tax. Withdrawals from an Education Savings Account are excluded from income for federal income tax purposes if used for qualified education expenses (described below). State income tax treatment of your Education Savings Account may differ from federal treatment; ask your state tax department or your personal tax advisor for details. Regular annual contributions to Education Savings Accounts must be made in cash, on behalf of a designated individual (the Student ) who is less than 18 years old at the time of the contribution, and rollover contributions must be made on behalf of a Student who is less than age 30 at the time of the rollover. These age restrictions do not apply to a Student who is a Special Needs Student (defined below). The trustee or custodian must be a bank or other person who has been approved by the Secretary of the Treasury. Contributions may not be invested in life insurance or be commingled with other property except in a common trust or investment fund. The Student s interest in the account must be nonforfeitable at all times. Upon the death of the Student, the account may pass to a beneficiary who has been designated as such and who is a qualifying member of the Student s family (this is explained below). If the account does not pass to such a beneficiary, any balance in the account should be withdrawn by the appropriate representative of the Student s estate within 30 days of the date of death (if not so withdrawn, the taxable amount will nevertheless be treated for income tax purposes as if it had been withdrawn). You may obtain further information on Education Savings Accounts from any district office of the Internal Revenue Service. The Donor (the person who establishes the Account) may revoke a newly established Education Savings Account at any time within seven days after the date on which he or she receives this Disclosure Statement. An Education Savings Account established more than seven days after the date of receipt of this Disclosure Statement may not be revoked. To revoke the Education Savings Account, mail or deliver a written notice of revocation to the Custodian at the address which appears at the end of this Disclosure Statement. Mailed notice will be deemed given on the date that it is postmarked (or, if sent by certified or registered mail, on the date of certification or registration). If the Education Savings Account is revoked within the seven-day period, the Donor will receive payment of the entire amount originally contributed into the Education Savings Account, without adjustment for such items as sales charges, administrative expenses or fluctuations in market value. An Education Savings Account is established on behalf of the Student and is controlled by the Student (or Parent). The Donor making a contribution, if not the Student or Parent, may designate the initial investments in the Education Savings Account, but shall have no further rights, interests or obligations related to the Education Savings Account, except that he or she can make additional contributions, subject to the limits described below. The Account Application must be signed by the Donor, and any and all forms, applications, certifications and other documents must be signed by the Parent if the Student has not yet reached the age of majority recognized by the laws of the state of Student s residence ( age of majority ). While the Student remains a minor, the Parent identified in the Account Application will exercise all of the rights and responsibilities of the Student, including the selection and exchange of Fund shares in which the Education Savings Account is invested. The Custodian s acceptance of the contribution to this Education Savings Account is conditioned on agreement by the Parent of any Student who is a minor to be bound by all of the terms and conditions of this Disclosure Agreement and the provisions set out in Articles I-X of the Custodial Account Agreement. The Student may notify the Custodian in writing that he or she has reached the age of majority in the state where the Student then resides (and provide any documentation the Custodian may request verifying the fact that he or she has attained such age). Upon receiving such request (and documentation, if requested), the Custodian will recognize the Student as the individual controlling the account with power to exercise all rights and responsibilities related to the Education Savings Account, and the Parent will thereafter have no control or power over the account. Note: The Custodian is under no obligation to determine whether any Parent actually holds the legal right and capacity to direct or control a Student s Education Savings Account.

14 Fees and Expenses Custodian s Fees The following is a list of the fees charged by the Custodian for maintaining your Education Savings Account. Annual Maintenance Fee per Education Savings plan $20.00 General Fee Policies Fees may be paid by you directly or the Custodian may deduct them from your Education Savings Account. Fees may be changed upon 30 days written notice to you. The full annual maintenance fee will be charged for any calendar year during which you have an Education Savings Account with us. This fee is not prorated for periods of less than one full year. The Custodian may charge you for its reasonable expenses for services not covered by its fee schedule. Other Charges There may be sales or other charges associated with the purchase or redemption of shares of a Fund in which your Education Savings Account is invested. Before investing, be sure to read carefully the current prospectus of any Fund you are considering as an investment for your Education Savings Account for a description of applicable charges. Contributions Who may contribute to an Education Savings Account? Anyone, including the Student, may open and contribute to an Education Savings Account established on the Student s behalf, as long as the Student is less than 18 at the time of the contribution or is a Special Needs Student. Contributions (subject to the limitations described below) may be made for the benefit of a Student who is a Special Needs Student, irrespective of his or her age. The person making the contribution the Donor can be anyone, even the Student; the Donor does not have to be related to the Student. Beginning January 1, 2002, the Donor may be a corporation or other entity. A Special Needs Student is a Student who, because of a physical, mental or emotional condition (including a demonstrable learning disability), requires additional time to complete his or her education. Any requirements for being a Special Needs Student specified in any IRS regulations or rulings defining this term must also be satisfied. Are contributions to an Education Savings Account tax deductible? Contributions to an Education Savings Account are not deductible. This is a major difference between Education Savings Accounts and Traditional IRAs. When can contributions be made to an Education Savings Account? A contribution by an individual Donor for the year 2002 or subsequent years may be made by the due date (without extensions) of the individual s federal income tax return for that year. Typically this will be April 15 of the following year. Also, if the Donor is a corporation or another entity (not an individual), the contribution due date for any year is December 31 of that year. How much may be contributed to an Education Savings Account? Donors may contribute up to $2,000 in a calendar year for the benefit of any one Student. For example, if Uncle Joe contributes $1300 to a RiverSource Education Savings Account on behalf of Bobby, his nephew, all other contributions made on behalf of Bobby by Uncle Joe or any other potential Donor (such as parents or grandparents) to this or any other Education Savings Account, are limited to $700 for that tax year. Note: The Custodian is under no obligation, nor can it be, to determine whether the maximum limit for any Student has been reached. It is the Parent s responsibility to consult with the other parent or guardian to determine whether the maximum limits will be exceeded. For Donors or other contributors who are individuals with high income levels, the contribution limits may be reduced below $2,000. This depends upon the Donor s filing status and the amount of his or her modified adjusted gross income (MAGI). The table below shows how the contribution limits are restricted. How are the limits calculated for MAGI in the reduced contribution range? If the Donor s MAGI falls in the reduced contribution range, that Donor s contribution limit must be calculated. To do this, multiply the normal contribution limit ($2,000) by a fraction. The numerator is the amount by which MAGI exceeds the lower limit of the reduced contribution range ($95,000 if single, or $190,000 if married filing jointly). The denominator is $15,000 (single taxpayers) or $30,000 (married filing jointly). Subtract the amount obtained from multiplying from the normal limit. For example, assume that a Donor s MAGI for the year is $197,555 and she is married, filing jointly. The Education Savings Account contribution limit would be calculated as follows: 1. The amount by which MAGI exceeds the lower limit of the reduced contribution range: $197,555 $190,000 = $7, Divide this by $30,000: $7,555 $30,000 = Multiply this by the normal contribution limit of $2,000: x $2,000 = $ Subtract this from the $2,000 contribution limit: $2,000 $ = $1, This is the contribution limit. EDUCATION SAVINGS ACCOUNT CONTRIBUTION LIMITS Modified Adjusted Gross Income (MAGI) Level If Donor is a Single Taxpayer or Married Filing Separately If Donor is Married Filing Jointly Then Donor May Make Up to $95,000 Up to $190,000 Full Contribution More than $95,000 but less than $110,000 More than $190,000 but less than $220,000 Reduced Contribution (see explanation above) $110,000 and up $220,000 and up Zero (No Contribution) Note: Limits are for years beginning on or after January 1, 2002.

15 Of course, if one Donor is prevented by these rules from making a full $2,000 contribution on behalf of a Student, another person (who is not the first Donor s spouse) may be willing to contribute so that the full $2,000 per year that the law allows will be added to the Student s Education Savings Account. Note: The prior rule saying that a contribution to an Education Savings Account could not be made on behalf of a Student for any year when a contribution on the Student s behalf was made to a qualified tuition program has been repealed. This prohibition no longer applies starting in How do I determine MAGI? For most taxpayers MAGI is the same as adjusted gross income, which is their gross income minus those deductions which are available to all taxpayers even if they don t itemize. (Instructions to calculate AGI are provided with income tax Form 1040 or 1040A.) Modified AGI is simply regular AGI adjusted to include certain amounts earned abroad. If a Donor has not earned income in any foreign country, Guam, American Samoa, the Northern Mariana Islands or Puerto Rico, normal AGI should be used in the calculations above. How are excess contributions penalized? If more than the maximum is contributed to the Student s Education Savings Account for a year, the excess is subject to a 6% penalty tax. The excess will be subject to an additional 6% penalty tax for each subsequent year that the excess remains the Education Savings Account. How are excess contributions corrected? Excess contributions may be corrected without paying a 6% penalty. To do so, the excess and any earnings on the excess must, in accordance with directions from the Student to the Custodian, be paid to the Student before the first day of the sixth month following the year in which the contribution was made (the Correction Deadline ). For calendar year taxpayers (most people), this means no later than May 31 of the following year. One other way to eliminate excess contributions (and possibly avoid the 6% excess contribution penalty tax) is to contribute an amount out of the Education Savings Account to a qualified tuition program, if there is one available to receive the contribution from the Education Savings Account. This must be done in the same year that the excess contribution was made. If you miss the deadline for either of the two ways to correct an overcontribution mentioned above, the penalty tax of 6% of the excess is due. However, you can avoid paying the 6% penalty in a subsequent year by undercontributing in that year. Each dollar of undercontribution offsets a dollar of excess contribution. Any excess contribution which is not eliminated in this way will be subject to another 6% penalty tax in the subsequent year. What happens if the excess contribution is not corrected by correction deadline? Any excess contribution withdrawn after the correction deadline for the year for which the contribution was made will subject the Student to the 6% excise tax. Unless an exception applies, the excess contribution and any earnings on it withdrawn after the correction deadline will be includable in the Student s taxable income and may be subject to a 10% withdrawal penalty. May a contribution be made to a qualified tuition program in the same year as a contribution to an Education Savings Account is made? Yes. Under prior rules a Donor could not contribute to an Education Savings Account in any year in which a contribution was made to a qualified tuition program for the same Student. (A qualified tuition program allows taxpayers to pay for a child s tuition in advance.) Under these prior rules, any amount contributed to an Education Savings Account in the same year that a contribution was made to a state prepaid tuition plan on behalf of the Student was an excess contribution, subjecting the Student to the 6% penalty tax discussed above. However, these prior rules do not apply beginning Investments How are Education Savings Account contributions invested? The Donor indicates the initial investment elections on the Account Application. Thereafter, the Student (or Parent, if the Student is a minor under state law) controls the investment by making choices among the available Fund(s) in accordance with the Fund rules. Investments must be in one or more of the Fund(s) available from time to time as listed in the Account Application for the Education Savings Account or in an investment selection form provided with the Education Savings Account Account Application or from the Fund Distributor or Service Company. The investments of your Education Savings Account are directed by giving the investment instructions to the Distributor or Service Company for the Fund(s). Since the Student (or Parent) controls the investment of the Education Savings Account, he or she is responsible for the investment results achieved; neither the Custodian, the Distributor nor the Service Company has any responsibility for any loss or diminution in value occasioned by your exercise of investment control. Transactions for the Education Savings Account will generally be at the applicable public offering price or net asset value for shares of the Fund(s) involved next established after the Distributor or the Service Company (whichever may apply) receives proper investment instructions from you; consult the current prospectus for the Fund(s) involved for additional information. Before making any investment, read carefully the current prospectus for any Fund under consideration as an investment for the Education Savings Account. The prospectus will contain information about the Fund s investment objectives and policies, as well as any minimum initial investment or minimum balance requirements and any sales, redemption, or other charges. Because you control the selection of investments for your Education Savings Account and because mutual fund shares fluctuate in value, the growth in value of the Education Savings Account cannot be guaranteed or projected. Are there any restrictions on the use of the Education Savings Account assets? The tax-exempt status of the Education Savings Account will be revoked if you engage in any of the prohibited transactions listed in Section 4975 of the tax code. Upon such revocation, the Education Savings Account is treated for income tax purposes as if it had distributed its assets to the Student. The taxable portion of the amount in the Education Savings Account will be subject to income tax unless the requirements for a tax-free withdrawal are satisfied (see below). Also, you may be subject to a 10% penalty tax on the taxable amount. What is a prohibited transaction? Generally, a prohibited transaction is any improper use of the assets in your Education Savings Account. Some examples of prohibited transactions are: Direct or indirect sale or exchange of property between you and your Education Savings Account. Transfer of any property from your Education Savings Account to yourself or from yourself to your Education Savings Account. The Education Savings Account could lose its tax exempt status if you use all or part of your interest in your Education Savings Account as security for a loan or borrow any money from your Education Savings Account. Any portion of your Education Savings