What’s Up with 529 College Plans in Texas?

States' 529 college savings incentives plans have become the newest way for families to save money for their children's future higher learning educational expenses. In Texas, there are two popular sections 529 college savings incentive plans that can help you save for the education your children deserve.

What Are the Two 529 Savings Incentive Plans in Texas?

The 529 savings incentive plans in Texas are known as Texas Tomorrow Funds. Separately, there are two funds: the Texas Tomorrow's College Investment Plan and the Texas Guaranteed Tuition Plan. Here is a brief overview of each plan so you can decide which one would work best for your family. But remember, you can also choose to invest in both plans if you so wish.

The Texas Tomorrow's College Investment Plan

This plan is managed by the Enterprise Capital Management group. The basic purpose of this 529 savings incentive plan is to provide a safe and secure tax-benefited investment vehicle for families who want to save for college. The Texas Tomorrow College Investment plan offers great flexibility, with a choice of over 20 different investment portfolios to choose from.

The Texas Tomorrow's College Investment plan allows your money to grow in a tax-free environment. It also allows for tax-free withdrawals when you are withdrawing earnings to be used for qualified education expenses.

What Expenses Are Covered by the Texas Tomorrow College Investment Plan?

The Texas Tomorrow's College Investment Plan covers all the basic higher education-related expenses, including tuition and mandatory fees, expenses related to room and board, textbooks and supplies, and some transportation costs. The Texas Tomorrow College Investment plan is very accessible, with easy year-round enrollment available. There are no age limits on this plan.

What Tax Benefits are Associated with the Texas Tomorrow College Investment Plan?

There are many tax benefits associated with this plan, including many federal tax benefits. Federal tax benefits for this plan include tax-free earnings, access to HOPE and Lifetime Learning tax benefits, as well as access to other favorable federal tax estate and some gift benefits.

Your Other Texas 529 Option The Texas Guaranteed Tuition Plan

The other section 529 plan available in the state of Texas is the Guaranteed Tuition Plan. The Guaranteed Tuition Plan helps families lock in the cost of a higher education today. It is a basically a prepaid plan where you can pay for your children's future college expenses at today's cost.

The plan allows you to use the benefits at any accredited institution of higher learning in the United States. The benefits of the Guaranteed Tuition Plan are protected under constitutional guarantee by the State of Texas. In most cases, earned distributions on the Guaranteed Tuition Plan are tax-free when they are used for most kinds of educational expenses.

What Expenses Does the Guaranteed Tuition Plan Cover? What about Tax Benefits?

The Guaranteed Tuition Plan covers only the basic expenses, which includes tuition and any mandatory fees. As for tax benefits, the Guaranteed Tuition Plan offers the same federal tax benefits as the Texas Tomorrow's College Investment Plan, which include tax-free earnings, access to the HOPE credit and Lifetime Learning credit, and other favorable federal tax credits.

What Are the Restrictions of the Guaranteed Tuition Plan?

There are certain restrictions on the Guaranteed Tuition Plan. For instance, the Guaranteed Tuition Plan has an age limit, available only for those newborn to 12th grade. Another restriction on the Guaranteed Tuition Plan is that it is not available for year-round investment.

Check the State of Texas web site for dates on when to enroll in the Guaranteed Tuition Plan. Also, to open a Guaranteed Tuition Plan account, you must be a citizen of the State of Texas.

States that Come Close to the 5-Cap Rating with 529 Plans

As your looking at plans, it’s a good idea to know about the states that come close to 5-cap rating with 529 plans. Let’s face it, the smartest thing you can do is pick the very best plans for your money. Ratings are assigned to each states program ranging from 1-cap (not very attractive) to 5-caps.

The cap system is based upon opinion and is not a formula. Different people might weigh these items differently. Case in point, some plans have different age requirements that affect their ratings. If your child meets these age requirements, this would be a non-issue.

The cap rating system prefers 529 plans that are flexible. You want a plan that easy rolls over to other state plans with no penalties and gives you freedom to change beneficiaries. It’s best to be able to have high maximums and low minimums with wide eligibility for owners and beneficiaries.

When it comes to liquidity and availability, you want to be able to use the account immediately for college expenses. It needs to be easy to deposit and withdraw from the account. Also, the ability to take out monies for items other than education without the account being closed is important.

To score high caps, the owner should be in control of the account. This means their ownership rights include being able to transfer ownership at any time and be able to name a new beneficiary in case of death.

The states that score the most caps back up their programs with additional state level benefits. In these states, there are things like state tax deductions for contributions and exemption for college used earnings. You may find exclusion of 529 accounts when you are applying for state financial aid. And of course, some states offer some great extra perks like loan programs and matching grants.

Another important scoring point is the state’s approach to investments and safety. The name of the game is lots of choices. It’s great to find well-designed investment plans and high rated portfolios. Low fees and expenses as well as age-based discounts on pre-paid tuition are key. The 5-cap states guarantee of pre-paid tuition contracts and downside investment protection.

Program resources need to have thorough and complete program materials including web site access. Having a call center is not enough; you need people there that are excited and knowledgeable about 529 plans. Finally, the cap ratings prefer successful efforts to gain favor from the IRS regarding status as a 529 plan.

The 5-cap rating is not based solely on historical returns. It does not predict the risk levels or predict future investment performance or how solvent the program funds are. This is just a measure of how useful the state’s 529 plan is based on the discussed factors.

The 5-cap programs offer great flexibility, attractive investments and benefits such as state tax breaks. These factors can add volume to your savings. In the 5-cap program, you will find very few weaknesses. Even a program rated 3-cap offers some very good benefits but may have some concerns that you need to research.

Now that you are refreshed on the positive aspects of the 5-cap rating, which states come close? The eight having plans for residents that are rated 5-cap are Alaska, Maryland, Michigan, Ohio, Rhode Island, South Carolina, Utah and Virginia.

Honorable mention should go to the 4-½ cap states of Colorado, Connecticut, District of Columbia, Georgia, Illinois, Indiana, Iowa, Louisiana, Minnesota, Mississippi, Missouri, Nebraska, New Mexico, New York, Oklahoma, Oregon, South Dakota, Vermont West Virginia and Wisconsin. Now that you know which states come close to the 5-cap rating with 529 plans, perhaps you can invest with just a bit more wisdom.

Quirks about Getting Education Loans Even with a 529 College Plan

Parents who are considering investing in a 529 college savings plan should be aware that there are some quirky rules about college savings, college loans, financial aid and parental financing for college that could impact the child’s ability to pay for college and should plan their financial investments accordingly.

Parents who are trying to figure out how to maximize their college investments for their child without losing money to some of the quirky college loan rules should be aware of several different factors that affect a child’s financial aid eligibility when applying for college.

When considering which type of 529 college savings plan to invest in, parents should keep in mind that some of the quirky rules about 529 plans and college loans that could cause confusion in the future and may even work against the student by limiting or reducing the amount of financial aid they are eligible to receive from the college or university they want to attend.

Pre-paid 529 plans can be tricky when it comes to taking out college loans in addition to having a pre-paid plan. Because pre-paid plans are paid to the school the money that is pre-paid is considered, for the purposes of financial aid, to be scholarship money and the student’s “need” figure is reduced by the amount of the pre-payment.

So while the pre-paid 529 account was set up to keep tuition costs low, it can mean that the student’s financial aid will be significantly lower than it would be without the pre-paid plan meaning that large college loans at high interest rates will be necessary to make up the shortfall in tuition costs.

Since eligibility for Federal college loans that have low interest rates and flexible repayment terms is based on both financial aid and need, having a pre-paid 529 means that most students and parents won’t qualify for the Federal college loans and will have to take out private loans from banks or other lenders that may not have interest rates that are as low or reasonable repayment terms.

While parents think they are doing the right thing investing in a pre-paid 529 college savings plan they may be doing more harm than good by using a pre-paid 529 plan to save for their child’s future college education.

Keep as much money as possible in the parents’ name. Money that is set aside in the child’s name, even in a 529 account, will directly impact the amount of financial aid that the student is eligible for. A student with a large amount of money in his or her name will not qualify for much financial aid, or large student loans, so keeping the investment in the parents’ name is the best way to invest money for college.

Parents’ contributions to the student’s education are considered when making financial aid decisions but not to the same extent as the amount of money that student has available for college that is in their own name. So in order to make sure that the child receives as much financial aid from the school as possible, keep the investment in the parents’ name, not the child’s.

Parents can expect some reduction in the amount of financial aid offered to their child if they have a 529 account, but it will be only a moderate reduction compared to the drastic reduction in financial aid that would occur if the 529 account was in the child’s name.

When planning for a child’s future it’s important to be aware of all the rules regarding college savings plans and how those investments might affect the child’s financial aid eligibility in the future. It’s always a smart idea to plan ahead for a child’s college education but make sure that the investments will help the child and not their chance at getting a high quality college education in the future.

Best States in Which to Fund your 529 Plan

What is a 529 plan, and how can it help your child achieve the best educational opportunities? Here is the skinny on what you need to know about a 529 college savings plan, including the best states in which to fund your 529 college savings plans.

What is a 529 College Savings Plan?

A 529 college savings plan is a special state-based college savings incentives program that helps you save money for your child’s college education. Not all states have a 529 college savings program that off the same kinds of benefits. Here are some things you should consider when you are choosing a 529 college savings plan.

Things to Consider When Choosing a 529 College Savings Plan

There are many important factors to consider when you are choosing a 529 college savings plan. First, you should consider the amount of time that your money will be invested.

You should consider your family’s tax bracket, how many (if any) fees and sale charges are associated with the plan, what kind of fees are involved, how much you will be investing, and what kind of state income tax deductions are allowed when you contribute. Pay close attention especially to fees. Even the slightest difference in percentage points will eventually add up.

Consider the State Tax Benefits

When choosing your 529 college savings plan, take into consideration your own state tax benefits. What kind of special tax benefits, if any, does your states 529 plan offer you? Does your state let you deduct all or part of your contribution on your state income tax form? This is something to consider.

What Kind of Costs are Associated with the Plan?

There are some plans that come loaded with high fees that will inevitably begin to eat into your returns. However, there are other plans with lower costs. Some analysts point to the plans managed by Vanguard and TIAA-CREF as those that have lower fees and costs.

Make sure you know exactly how much you will be paying in fees, including administrative costs, fund loads, management fees, and sales’ charges, both front-end and back-end. Ask for a list of all possible costs associated with the plan.

Consider the Different Investment Options

What kind of investment options are you looking for? Most state 529 plans offer different types of investment options. Decide what kind of investment style and performance you are comfortable with before you invest.

Who Has the Best 529 College Savings Plan?

Most analysts agree that it is a good idea to compare closely your own state’s 529 plans with the plans of at least two other states. Here are some things you should definitely consider when you are comparing different 529 college savings plans. First, consider what kind of state tax incentives will be available to you.

Does one state’s 529 plan offer tax-free withdrawals or special deductions? Is the plan generally affordable for you? What kind of investment performance has the plan shown in the past? Is the plan flexible enough for your needs? Does the plan offer low costs? These are all things to consider when you are finding the 529 state college savings plans that work best for your family.

Ranking the Best 529 College Savings Plans

Many analysts have ranked the best 529 college savings plans. In general, most analysts agree that the following states have some of the most desirable feature: Pennsylvania, Texas, South Dakota, Iowa, Virginia, Arkansas, Maryland, New Jersey, Nebraska, Florida, Utah, Hawaii, Illinois, and Louisiana.

Most analysts agree that most TIAA-CREF plans offer all-around desirable features. States with TIAA-CREF managed plans include New York, Idaho, Kentucky, Tennessee, California, Vermont, Georgia, Michigan, Connecticut, and Michigan.

Keeping Track of your 529 College Plan Contributions

There are several reasons that it’s important to keep track of your 529 college plan contributions. When investing in a pre-paid 529 college plan account overpayment means money that parents won’t be able to withdraw or to use if the student doesn’t need it or ends up not going to college.

When investing in a non pre-paid 529 college savings account it’s important to keep track of your investment contributions because that money may be subject to an income tax deduction in the state you live in.

This is important for any family member who is contributing to the child’s 529 college savings fund, and anyone in the family can contribute money to the college savings fund although the contribution may not be tax deductible in all states.

Keeping track of your contributions to a child’s 529 college savings account is also important so that you can keep track of how much money has been invested, if the investment is growing fast enough and what the rate of growth is. After all, that account is very important to the family because the child’s future education depends on it.

The money that parents or other family members contribute to a 529 college savings account is considered to be a gift and as a gift that money qualifies in the tax code as part of the annual $11,000 gift tax exclusion. So, any family member can contribute up to $11,000 annually without any taxes being applied to that money.

According to the current Federal gift tax law, parents and family members can give up to five years' worth of financial gifts, so a total of $55,000, in one year with no tax penalties, however that person would not be able to contribute any money to the account for four years following that year.

Making a large contribution makes a lot of sense whenever a parent or family member can afford it because the interest on such a large payment would accrue faster and in greater amounts than interest on smaller payments, even if there were lots of smaller payments made during the year.

If you have a personal banker or investment professional who takes care of the household’s investments make sure that the investment professional gives you a detailed accounting of all the contributions made to the non pre-paid 529 college savings account every quarter or every month and keeps you advised of important matters pertaining to the account.

The best way to make sure the investment is doing well is to monitor it yourself, but many people find investing confusing and prefer to leave their investments to be managed by a professional.

When tax time comes around, be sure to document all your contributions to the child’s 529 college savings program if your state allows tax deductions on that money to make sure that those deductions are applied to your taxes.

Keeping track of your 529 college plan contributions also means staying on top of the latest developments in the laws regarding 529 college savings plans. Make sure to stay on top of any changes in the laws regarding 529 college plans to make sure that you don’t end up losing money.

While a non pre-paid 529 college savings plan has a relatively moderate risk level, there is still some risk and it’s best to monitor the contributions and management of the 529 college savings plan closely to make sure that the investment is still performing well and growing under the asset company’s management.

Be sure to address any questions about the contributions to or the performance of the 529 college savings account to the asset management company chosen by the state to administer the account rather than to the state itself because the state is not involved in the direct management of the 529 college savings fund.

Learning about State Tax Deductions with 529 Plans

When planning ahead and investing in a college savings plan to make sure that money is available for a child’s college education it’s important to learn everything possible about the many different types of college savings plans and the different rules regarding taxation of those savings plans.

For parents, this information can be confusing but it’s very important to make sure that the investment is set up correctly and the best type of investment is chosen to make sure that the money the parents have to invest makes as much money as possible for the child’s education

Most parents end up investing in 529 college savings plans but the laws surrounding 529 college savings plans are complicated and can be different in each state since the 529 college savings programs are state run.

Learning about the state tax deductions allowed for 529 college savings plans is very important. The laws regarding taxes, tax deductions, and 529 college savings plan are different in every state, so parents should look for information regarding taxes and 529 college savings plans in the state where they live before investing.

Parents who invest in a 529 college savings plan that is not a pre-paid college savings plan are not eligible for a Federal tax deduction on the amount of that investment however investing in a 529 college savings plan does have some benefits because money invested in a 529 college savings plan is tax free, and deductions made from the 529 college savings account that are applied to educational costs are also tax free.

Some states offer parents a state income tax deduction on money that it is contributed to a 529 college savings account. Each state is different, but it’s easy to find information about 529 college savings plans and tax laws that are listed by state so that residents of each state can find out what the laws are where they live and what tax deductions, if any, they are entitled to when opening a non pre-paid 529 college savings account for their child.

In terms of taxes, the thing to watch out for when investing in a 529 college savings plan that is not a pre-paid 529 college savings plan is the penalties and tax fees for early withdrawal of that the investment money.

If parents withdraw the money from a non pre-paid 529 college savings plan account for any reason other than applying that money to specified higher education expenses there is a significant early withdrawal fee and tax penalty.

When the investment is withdrawn early and not used for educational purposes, the amount of money that withdrawn from the earnings portion of the 529 college savings account will become subject to state income tax plus an additional 10% tax on that portion of the investment.

There are a lot of rules and complicated issues when it comes to non pre-paid 529 college savings accounts and parents should make sure that they understand all the rules and the tax laws regarding 529 college savings accounts before they invest in a 529 college savings account to make sure that in the future they are not left in a situation where they didn’t put away enough money for their child’s education or end up paying heavy tax penalties and fees and end up without enough money to pay for their child’s education because they didn’t understand the tax laws regarding 529 college savings accounts when they first opened the account.

It’s more important than ever these days to put aside some money for a child’s education because college costs are skyrocketing every year. Be sure to invest wisely to make sure that the investment provides enough money for the child’s future college education.

Your Investment Options with the 529 College Plan

It’s time to research your investment options with the 529-college plan. It doesn’t matter how old or young your child is, its never too early or late to invest in their future. You just need to know your options to make the best choices for your money.

The first option is age-based. This seems to be the simplest way to save for college. Age based frees you from adjusting your allocations over time. Your assets will be managed according to the age of your child. Younger children will have portfolios with a higher stock concentration.

As your child ages, the assets are automatically shifted to a higher ratio of short-term investments and bonds that are more stable and will reduce your market risk.

You have three choices of age-based investment options- conservative, moderate and aggressive. For most age groups, the conservative investment has a higher concentration of assets in short term investments or bonds than the moderate.

Following suit, the moderate investment has more short-term investments and bonds than the aggressive. For example, conservative 529 portfolios for a 5 year old typically would be 50% stocks and 50% bonds.

A moderate portfolio for the same age would be 35% stocks and 65% bonds while an aggressive age based investment would be 100% stocks. Bond investments are safer as they do not decline as stocks do when the market sinks. But, keep in mind that they will not grow in value as much when the market rises.

You may find that the age-based funds are either too mild or too wild for your investment tastes. If this is the case you may want to set up an individual portfolio made of equity funds. In 529 savings plans there are so many different options. It depends upon the plan provider and your state. They tend to offer the same type of options as mutual funds.

Some of the investment options offered for 529 plans are growth funds, value funds, small-cap funds and mid-cap funds. Let’s just briefly look at these options. A growth fund tends to buy companies in the consumer staples, technology and health care. They typically sell at higher price to book value ratios. A value fund tends to buy companies in industrial, energy and financial arenas.

They typically sell at a lower price to book value ratios. They tend to outperform growth stocks over longer time periods. Small-cap funds own companies with market capitalizations of less than $1 billion while the mid-cap funds own companies with $1-$5 billion in market capitalization.

What does this mean for your plan? Individual portfolios offer many, many choices of stock funds, bond funds, balanced funds and money market options. Unlike the age-based investment options, the asset allocation of your portfolio will remain fixed over time. Regardless of your child’s age, your investment choice will not be altered.

If you decide to go the route of individual portfolio investments when starting your child’s 529 plans, take a look at the age-based plans. Use them simply as a guide for concentration of stock, bond, short and long term investment allocation.

Then, if you opt to go the individual portfolio route, they can help guide your future investments into the account as well as help you move your existing funds into more conservative investments, as your child gets closer to college age.

Your child is not getting any younger. Today is a great day to make some plans for college funding. Your investment options with the 529-college plan are so vast. It’s time to do your homework and pick an investment option that works for you.

Why Consider Out of State 529 Plans?

Why go out of state to shop for a 529 plan? Should you be considering other options? Let’s face it, not all state 529 plans are created equally. It is recommended that investors look at their home-state plans as a first option.

Some states have great incentives such as state tax deductions on contributions and matching grants. A poor 529 plan may wipe out the benefits such as deductions and grants. Look for a state tax deduction calculator on-line to determine the value of the benefits.

Make sure you find the plan with the lowest fees. Take a look at the Utah Educational Savings Plan Trust. With this plan you will find nine tried and true index and international offerings from Vanguard with a charge of only 0.38% per year for it’s most expensive option. You can compare this to Nebraska’s AIM College Savings Plan that has a heavier price of 1.35% to 1.61% with traditionally weaker funds.

Conservative investors should be aware of how much their state plans put into the stock market. The Michigan Education Savings Program is a good choice for the cautious investor. The plan even has a savings option, with no annual fee, that guarantees a minimum yearly interest rate and principal based on a Treasury note index. This plan also has portfolios of TIAA-CREF mutual funds that are more like bond funds than other 529 plans.

Look and see if your state 529 plan has the best portfolios of underlying funds. Compare it to plans like the Maryland College Investment Plan. They use a great blend of funds from T. Rowe Price. And the plan’s most expensive option costs just 0.98% annually.

Some people prefer to build their own portfolios. Look for a state that has a good mix of investment choices. For example, the College Savings Plan of Nebraska offers a selection of 20 funds including Vanguard, American Century and Fidelity funds.

In 2006, Kansas, Maine, and Pennsylvania all passed “tax parity” laws. This means that tax deductions are extended on contributions to residents who have invested in 529 plans from other states. This is unlike the other states that only extend state tax breaks to those who selected in-state plans. This tax parity law allows more flexibility to investors to select investments more suited to their wants and needs.

Look for a 5 Cap 529 program. States are rated on a scale of one to five. A 5 Cap program meets high standards in program flexibility, liquidity and availability of assets, strong ownership rights, state benefits, investment approach and safety, and program resources.

Three plans that have 5 Cap ratings and have been rated among the best 529 plans are the Maryland College Investment Plan, the Utah Educational Savings Plan and the Virginia College America Plan. Check them out to see how they compare to the plan in your home state.

All savings and prepaid plans are transferable to out-of state and private institutions. There will be no penalty if you have an out of state 529 plan if your child attends a local college. Your child will still be eligible for in-state tuition in the home state. They will still pay the lower tuition for Iowa students if you use the Nebraska plan.

It’s not advisable to flutter among 529 plans from state to state. Do your research or talk with a financial advisor. Pick the plan that makes the most sense for your family. Your state may very well have the plan that works best so why consider out of state 529 plans? Because it’s your money and you need to make sure it’s working hard for you!

A Sunny view on Florida’s 529 College Plan Options

Take a look to Florida for a sunny view on 529 college plan options. The Florida College Investment Plan (which is managed by the State of Florida) offers five great investment options. You can choose one or any combination of the investment options.

Once in a calendar year, you can transfer the money that you have already invested from one option into another. Plus, you can change the allocation of new monies as often as you please.

For a moderate risk option you should look into the first option, which is a Fixed Income Investment. This option is invested mainly into things like mortgaged backed securities, U.S. Treasury Bonds and corporate bonds.

The second option for your 529 is a little riskier. It’s the U.S. Equity Investment Option, which makes equal allocations of your monies among an S&P 500 index portfolio, a large capitalization growth portfolio and a large capitalization value portfolio.

The next option is my favorite, an Age Based Option. This allows you the flexibility to choose how conservative, moderate and high risk you wish for your 529 investments to be. It’s based on the age of your child. You would have more monies invested in equities the younger your child is. As your child gets closer to college age, there would be an increase in the amount invested in fixed income investments.

The fourth of Florida’s 529 college options is a Balanced Investment Option. What this means for you is that your monies are equally distributed between the U.S. Equity Investment Option and the Fixed Income Investment Option.

The goal of the Balanced Investment is to create long-term growth but with less risk than by investing alone in the U.S. Equity Investment Option. This portfolio is reviewed occasionally to keep a 50/50 allotment of monies to the U.S. Equity Investment Option and the Fixed Income Investment Option.

And last but not least is the 529 Money Market Fund Investment Option. This fund has a portfolio of short-term fixed income securities, money market and cash securities. The goal of this fund is to keep your main investment and obtain high liquidity through short-term securities.

The great thing about these 5 options for Florida’s 529 plan is that you can pick just one or a combination. Do whatever fits your financial goals best.

The fees for these accounts are minimal. Expect a $50 enrollment fee, and an asset management fee of 0.75%. Unlike a lot of other 529 plans, the Florida College Investment Plan charges no commissions or sales tax. You do not have to be a resident of Florida to participate so it’s a great plan for grandparents to invest for their grand children who live out of state.

The minimum opening amount is $250 and your account has a maximum funding amount of $341,000. Once the total value of the accounts for the each child reaches $341,000 you cannot add any more monies. But the market value can continue to grow and you can have accounts of $341,000 for more than one child. There are no age restrictions either, so you can even open an account for an adult.

Imagine $341,000 stowed away for college that is growing tax deferred. And when your child is ready for college, qualified expenses are exempt from federal income tax. Plus, the great state of Florida has no income tax and the plan assets are exempt from Florida Intangible tax. There is a sunny view on Florida’s 529 plan options. Florida is a great place to have a 529 plan for your child.

What the $12k Gift Tax Exclusion is All about in Terms of 529 Plans

When you get ready to save for college, whether you are saving for your own child or for a grandchild, there are many possibilities for you to consider. Will need shear it gets more and more expensive to fund a college education. Because of this many people are looking into starting college education funds from the time of their child or grandchild is very young.

One of the more popular ways to save for college is the 529 plan that allows you to put money back for college now and lock in today's savings. Another reason why the 529 plan is so popular is because of the $12k tax exclusion. This tax exclusion allows anybody to give to a 529 plan tax-free, as long as it does not exceed $12,000. Here is a closer look at the 529 college savings and this gift tax exclusion.

There are many reasons why the 529 plans are so popular today. These types of plans encourage people to save now for their child's future college expenses. This plan is also known as the qualified tuition plan and is sponsored by state colleges and universities and are fully endorsed in authorized by the Internal Revenue Service.

There are essentially two different types of 529 college savings plans. One is the prepaid tuition plan, and one is the college savings plan. All 50 states support these plans, and all public colleges and universities are required to take the 529 college savings plan. There are even a small group of private colleges and universities that will accept this plan as well.

The prepaid 529 plan is quite popular because it is accepted in all states at public universities and colleges in locks in college tuition fees at today's costs. The money saved using the 529 plan covers all costs associated with attending college, including room board books and other necessities.

Many family members like to contrary to the 529 college savings plans for a variety of reasons. One of these reasons is because they can give this money to the recipient and save on taxes. You have got to $12,000 as the gift tax exclusion is applied to your gift. All contributions to a 529 college savings plan are completely exempt from the estate taxes and gift taxes.

If the certain specifications and criteria are met. For example, a parent who owns an account for their child can make a lump sum contribution of up to $60,000 for each of their children when they did this.

They can avoid incurring a taxable gift on this amount. This is a great way to save money for college without being double tax in the end. Nobody wants to have their child go to the frustration of having to pay taxes on a lump sum of money that they have intended to use as college.

In addition is also important to remember that the 529 college savings plan is also popular because it is safe from bankruptcy, should it occur. Almost everyone can open a 529 plan based on their financial situation, because most of these plans offer a wide variety of saving options.

The best way to get detailed information about the 529 savings plan is to consult your account or financial advisor or find information on the Internet before deciding to use a 529 plan were before you decide to use the $12,000 gift tax exclusion you should understand how these plans were and how it will affect your income.

When you have children, and you want them to attend college, why wait until it's too late to save for college? Learn more about the 529 college savings plan today and start saving now.

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