September 15, 2006 8:58 AM
Quick Facts of 529 Plans
• Earnings from a 529 plan are exempt from federal taxes, as are any withdrawals, as long as they go toward paying college costs.
• Some states waive state taxes for residents, other states allow deductions on contributions.
• 529 plans have generous maximum contribution limits -- some as high as $250,000 per beneficiary.
• Most states hire experienced investment companies, such as TIAA-CREF to manage their 529 accounts.
• If funds are withdrawn for purposes other than education, the earnings are subject to a 10 percent penalty as well as federal income tax. States may assess their own penalties.
Great for grandparents: 529 contributions are considered completed gifts and are excluded from your estate. Grandparents can also switch beneficiaries to other grandchildren.
Note: Each 529 plan has its own set of rules and restrictions, which are subject to change. Make sure to request the most recent plan details from plan administrators.
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