KRS 164A.707: Prepaid tuition contracts -- Amendments -- Accounts not subject to

creditors or taxes -- No guarantee of attendance at institution -- Payment of

contracts -- Beneficiaries -- Investments and earnings -- Contracts not

securities or annuities -- Contracts subject to amendment by subsequent

change to statute, regulation, or policy.

(1) Purchasers buying prepaid tuition for a qualified beneficiary shall enter into prepaid

tuition contracts with the board. These contracts shall be in a form as shall be

determined by the office. The contract shall provide for the purchase of a tuition

plan for prepaid tuition for the qualified beneficiary from one (1) to five (5) specific

academic years.

(2) Upon written notification to the office a purchaser may amen d the prepaid tuition

contract to change:

(a) The qualified beneficiary, in accordance with 26 U.S.C. sec. 529;

(b) The projected college entrance year for which prepaid tuition is purchased.

Beginning July 15, 2014, if the amendment extends the projected college

entrance year, the utilization period shall begin with the initial projected

college entrance year;

(c) A tuition plan designation to another tuition plan designation;

(d) The number of years for which prepaid tuition is purchased; or

(e) Other provisions of the prepaid tuition contract as permitted by the board.

(3) A prepaid tuition account shall not be subject to attachment, levy, or execution by

any creditor of a purchaser or qualified beneficiary. Prepaid tuition accounts shall be

exempt from a ll state and local taxes including, but not limited to, intangible

personal property tax levied under KRS 132.020, individual income tax levied

under KRS 141.020, and the inheritance tax levied under KRS Chapter 140.

Payments from a prepaid tuition account used to pay qualified postsecondary

education expenses, or disbursed due to the death or disability of the beneficiary, or

receipt of a scholarship by the beneficiary shall be exempt from tax liabilities.

(4) Nothing in KRS 164A.700 to 164A.709 or in a pr epaid tuition contract shall be

construed as a promise or guarantee that a qualified beneficiary shall be admitted to

an eligible educational institution, be allowed to continue to attend an eligible

educational institution after having been admitted, or b e graduated from an eligible

educational institution.

(5) Prepaid tuition contract payments shall not be made in real or personal property

other than cash and shall not exceed the prepaid tuition. Prepaid tuition contract

payments may be made in a lump sum or installments.

(6) The purchaser shall designate the qualified beneficiary at the time the purchaser

enters into a prepaid tuition contract, except for a prepaid tuition contract purchased

in accordance with KRS 164A.700(13)(d). In the case of gifts mad e to the fund, the

board shall designate a qualified beneficiary at the time of the gift.

(7) The prepaid tuition contract shall provide that the purchaser and the qualified

beneficiary shall not directly or indirectly or otherwise control the investment of the

prepaid tuition account or earnings on the account. Payments made for prepaid

tuition shall be accounted for separately for each qualified beneficiary. No interest

or earnings on a prepaid tuition contract of the purchaser or qualified beneficiary

shall be pledged or otherwise encumbered as security of a debt.

(8) A prepaid tuition contract does not constitute a security as defined in KRS 292.310

or an annuity as defined in KRS 304.5-030.

(9) Each prepaid tuition contract is subject to, and shall inco rporate by reference, all

operating procedures and policies adopted by the board, the statutes governing

prepaid tuition contracts in KRS 164A.700 to 164A.709, and administrative

regulations promulgated thereunder. Any amendments to statutes, administrativ e

regulations, and operating procedures and policies shall automatically amend

prepaid tuition contracts, with retroactive or prospective effect, as applicable.