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529 College Savings Plan (Qualified Tuition Program)

College is getting more expensive every year. Four years in a public school costs roughly $ 70,000 and in a private school $139,000. The best way to prepare is to start saving now. The earlier you start making regular contributions, the better prepared you’ll be when those college expenses start rolling in. A great way to start this process is by opening a 529 College Savings Plan. You can design an individualized savings plan that meets your needs. Factors that need to be considered are:   1) Estimated college cost  2) time frame  3) contributions needed  4) how many children  5) inflation and other  economic factors.

Here are the general rules


  1. You can open a 529 plan for anyone-your child, grandchild, spouse or even yourself
  2. The contributor is usually the owner and the beneficiary is the future student
  3. Earnings in the account can grow tax free
  4. There are no income limits. You can contribute no matter how much you earn
  5. Contributions are not deductable on your tax return. It is considered a gift
  6. You can contribute up to $65,000 per year without gift tax issues. There is a $350,000 maximum value in which  no more contributions are allowed
  7. You maintain control of the assets. There’s no predetermined investment mix. As your investment advisor I will allocate your funds that best reflects your needs. We are allowed to move assets only once a year or when you change beneficiaries.
  8. You can use a 529 plan to pay higher education expenses at any eligible educational institution in US
  9. You  can change the beneficiary from one family member to another once a year
  10. Anyone can contribute to the account. However, only the account owner can make decisions regarding the account, including taking withdrawals from the Account, changing the Account’s investments and changing the Beneficiary.
  11. You are permitted to roll over funds without federal income tax consequences from one 529 plan to another 529 plan for the same Beneficiary once every 12 months.


  1. You decide when to make withdrawals
  2. If you withdraw money for something other than qualified higher education expenses, you will owe federal income tax and in addition may face a 10% federal tax penalty on earnings.  If distributions are more than the beneficiary’s qualified expenses, the earnings portion of the excess is included in the beneficiary’s income

Qualified higher education expenses include:

  1. Tuition, fees, books ,supplies and equipment required for attending an eligible school
  2. Reasonable costs of room and board for those who are at least half-time students in a degree program
  3. Certain expenses of a special-needs beneficiary needed to complete their education

Other Considerations

  1. You should receive Form 1099-Q, payments from Qualified Education Programs from the plan sponsor showing information related to QTP distributions
  2. The account owner is strongly encouraged to designate a successor account owner. If the original account owner dies or is declared legally incompetent, the designated successor becomes the account owner. If   there is no successor owner, the estate of the deceased account owner becomes the new account owner.
  3. Your 529 plan holdings could impact your beneficiary’s ability to qualify for grants and student loans.  The 529 plans may also affect a Beneficiary’s ability to qualify for federal need-based financial aid. Effective July 1, 2009, a 529 account, will be regarded as an asset of the student if the student is an independent student and an asset of the parent if the student is a dependent student. An independent student generally includes an individual who:
    • is age 24 by December 31 of the award year
    • is an orphan, in foster care or a ward of the court (other rules may apply)
    • is an emancipated minor
    • is a war veteran
    • is a graduate or professional student
    • is married
    • has legal dependents other than a spouse
    • is homeless (other rules may apply), or
    • has special and unusual circumstances which can be documented to his or her financial aid administrator