When I looked at the CA plan versus an out of state plan, my understanding was that
1) if you participated in the CA 529 plan, qualified withdrawals from the 529 plan would both be Federal and State tax exempt.
2) If you participated in an out of state plan, qualified withdrawals would only be federal tax exempt (not state tax exempt).
Someone correct me if I’m wrong.
After looking at Vanguard’s Nevada 529 and looking at Fidelity CA 529, I opted to participate in the Nevada plan because i didn’t like Fidelity’s fund selection. But to get around the state tax issue, I was just planning to open a CA 529 plan and transfer from the nevada plan when the time came.
I considered participating in other state plans, namely because i was interested in certain state laws. For example, some states consider 529 plans like a “retirement” plan and offer asset protection. Generally, those states exclude “retirement” plans from creditors. Unfortunately, it seemed like those state laws only applies to state residences. And CA doesn’t have such laws that would protect your 529 plans from creditors. So it was a moot point.
CA suck. You can just about sue anyone for anything.
