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529 College Savings Plans

There are different options if you want to allocate money for the financing of higher education. One of them is through 529 plans. These plans have unique features from one state to another, but they have some common as well. This article provides an overview of some of the basic characteristics of 529 plans.

529 Plan Benefits

529 plans are targeted toward saving for the college years, though the number of benefits they provide has helped some people transform 529 plans to serve other purposes too.

Here are some of the major beneficial characteristics of 529 plans:

  • Growth of investment

    By investing money in a 529 plan you are able to achieve growth.

  • Control over the money

    The person who controls the money is the donor. This means that the child doesn't receive irrevocably the accumulated money. Additionally, under the discretion of the donor, the beneficiary can be changed. This can happen if the child receives a scholarship and doesn't need the money. The funds can be then transferred to the name of another child.

  • Tax benefits of 529 plans

    Some state 529 plans give the opportunity to plan users for state tax deduction. Additionally, your money may enjoy growth without being disturbed by taxes provided that you meet all IRS requirements.

  • Large contributions

    The contributions to the 529 plans can be of relatively high values. However, the limits vary from one state to another, so you should see the ones that apply for you.

  • Using another state's plan

    You also have the option not to use the 529 plan offered by your state, but to sign for one with another. However, keep in mind that by doing this you lose your tax benefits.

As you can see 529 plans provide many benefits to their users. If you have read only this part of the article, you might think that these plans are perfect. On the other hand, before investing in a particular 529 plan you should make a careful research beforehand to select the one most suitable for you.

The disclosure statement is a good source of information regarding the features of a specific 529 plan. This statement is also known as the prospectus or the offering statement. It will give you an insight to the basic characteristics of the 529 plan you have chosen.

It is also recommendable that you refer to a professional tax advisor before you take any actions that can bring you problems with the tax authorities.

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