As summer has been winding down, so many of our clients’ children and grandchildren have headed off to college in the last few weeks and have begun (or resumed) tackling hefty tuition bills. Many families have set aside funds, in one form or another, in advance for these college costs. Setting aside funds for future college costs in advance not only can help provide peace of mind, but also may generate “subsidies” by the available gift, estate, and income tax benefits. One of the ways this can be accomplished is through investments in 529 plans.
Basics
A qualified tuition program (QTP), more commonly known as a “529 plan,” is an education savings program which allows you to make contributions to an account set up to meet an individual’s future higher education expenses or buy tuition credits for an individual. The name “529″ refers to Section 529 of the Internal Revenue Code which was enacted by Congress in 1996 to create these types of savings plans which encourage saving for higher education by providing generous tax breaks.
