College can be very hard to afford for your children. We wont’ go into whether it is worthwhile or the details of the planning/savings for it, but one investment vehicle that may be helpful is the 529 plan. There are quite a few articles out there, but I wanted to cut it down to the bare bones of what the benefits are. So here it is in a quick short list:
- The donor has control over the account – meaning no new xboxes, shiny new cars, or Vegas trips for your child.
- Contributions grow tax deferred, taxed if not used for educational purposes when taken out.
- Educational purposes include tuition, books, room, board, transportation and even computers.
- Account can be transferred to other family members, especially if you have multiple children.
- Contribution limit is 13,000 per person to the beneficiary with no gifting tax issues as of 2012.
- A maximum of 5x annual contribution limit may be made up front and the gifting may be spread out over 5 years to avoid use of the lifetime gifting limit. 5 x 13,000 = 65,000 per person or 130,000 for a married couple. The 130,000 would equal 13,000 per person, and then considered a gift each year for the next 5 years.
There it is. Short and sweet. Hope it helps!