Prepaid Tuition and Savings (529) Plans

Description: This web site will teach you about prepaid tuition and savings through individual states. All 50 states offer at least one 529 plan and manage these investments for future college expenses.

Requirements: Organized finances and a desire to pay into future for education.

Objectives:

1. To understand the types of prepaid tuition plans available.

2. To know how to manage these types of plans.

What are the two types of plans?

The two basic types of 529 plans are prepaid tuition and savings.

Prepaid tuition plans cover in-state tuition for public schools with provisions that permit you to apply the built-up value for private and out-of-state schools. While inevitable variations exist in every state and plan, generally you can apply the full value of these 529 assets towards private and out-of-state schools.

Savings plans are helpful if you want to attend school overseas as they allow you apply the full value of your plan internationally and to any accredited schools in the U.S.

What are the advantages to the 529 Plans?

The 529 plans have 4 main advantages:

1. Tax /peaks

The money paid into the plans is allowed to grow tax free. No federal tax exists for eventual distribution.

2. Control is Retained

The donor remains in control of the plan investment. You can make a withdrawal at any time, but you will have to pay the taxes due as well as a 10% penalty.

3. Eligibility

This one is very easy. Everyone is eligible to participate and there are no age or income restrictions.

4. Estate Planning

Up to $55,000 can be contributed over a 5-year period and be exempt from gift taxes.

In conclusion, we highly recommend that you talk with a trusted advisor such as a CPA (Certified Public Accountant) or CFP (Certified Financial Planner) if you have questions about these plans. Just remember, there are a lot of differences between plans and the tax rules that govern them change all the time.