Setting up an education savings plan for your children or grandchildren can be confusing. There are many options to provide for the future of your loved ones. Tax issues, control and qualifying expenses are just a few things to consider when choosing how you will invest for future education.

We think one of the best plans is the Qualified Tuition Plan, sometimes called a “Section 529 Plan.” In addition to providing for a loved one’s education, Section 529 plans can also be used as an effective estate planning tool and can help reduce current income taxes.

In brief, a Section 529 plan is an investment account you set up for a child, grandchild, or other “designated beneficiary.” You can place up to $55,000 in the account in any one year and earnings in the account accumulate tax-free. If the funds are eventually used by the beneficiary for qualified education expenses, then the earnings are never federally taxed. (State tax treatment varies by state)

What’s more, you retain control and you can change beneficiaries at any time and for any reason (or for no reason at all). You can even make yourself the beneficiary, and so long as you use the funds for qualifying education expenses, the earnings remain federally tax-free until December 31, 2010 when this exemption expires. (State tax treatment varies by state)

Please call me to set up a time to discuss whether a Section 529 plan might be right for you and your loved ones.

Advantage of Section 529 Qualified Tuition Plans

• Income and growth are tax-free as long as withdrawals are used for qualified higher education expenses.
• You retain control to disburse the money.
• You can change the beneficiary.
• You can take the money back (and pay taxes and penalties.)
• If money remains after the beneficiary graduates, it can be used for graduate school or transferred to another family member.
• Estate planning can include transfers to Section 529 plans.
• Students may attend any accredited school in the nation. School does not have to be named when the account is opened.
• Money can be used for most college expenses including tuition, fees, books, supplies, and room and board.