20 Short Facts about 529 Plans (Part 2 of 2)
NUTS AND BOLTS
12. The person setting up the 529 plan account (usually a parent) is called the account owner. The person who will be using the account to attend school is called the beneficiary.
13. One solution to the problem of overfunding a 529 plan is to change the beneficiary on the plan. If child #1 finishes her education and assets remain in the 529 plan account, switch the beneficiary of the account to child #2, to yourself, to your spouse, or to another relative.
14. Anyone can contribute to a 529 plan. So you can set up the plan and make contributions for the benefit of your children (a separate plan for each?), and your parents and your spouse's parents can also contribute.
ESTATE AND GIFT TAX
15. 529 plans interest both financial planners and estate planners. Why estate planners? Because of the gift element. Here's another tax advantage to 529 plans -- you can currently give up to $12,000 per year to any given person without any gift tax implications. The rules for 529 plans allow you to "front load" five years of these annual gifts into one big gift. So, you could kick off a 529 plan for each grandchild by giving $60,000 in year one. (Just be sure not to make any other gifts to the grandchild for the next five years.)
16. In most cases, if the account owner dies, the 529 plan account will not be included in his estate for estate tax purposes.
RESOURCES
17. Illinois has two main 529 plans: Bright Start Savings and Bright Directions.
18. The Bright Start Savings website is here.
19. Bright Direction is a newer program -- its website is here. As scary-looking Illinois State Treasurer Alexi Giannoulias puts it, "This plan allows your [professional financial] advisor the flexibility to build your college savings as aggressively or conservatively as you see fit."
20. Saving for College seems to be the most popular website for researching 529 plans.
