Charles Marsala Explains College Savings 529 Plans

Charles Marsala November 23, 2014 0
Charles Marsala Explains College Savings 529 Plans

Signed into law in 1996, 529 college savings plans provide everyone, regardless of income, a tax-advantaged higher education savings vehicle that allows for substantial contributions and considerable flexibility. According to Strategic Insight 529 plans had $204.5 Billion in assets as of the fourth quarter of 2013 a 21.3% increase over 2012.
529 Plans feature higher contribution maximums than Coverdell ESAs and tax advantages not available in UGMA/UTMA accounts.
Coverdell plans have maximum earnings for contributors ($220,000.00 for couples) and $2,000.00 a year for a beneficiary. They offer tax-free growth and withdrawals to qualified expenses for elementary school through college.
529 Plans offer: Tax-deferred Growth; No income limits; can be used for higher education, trade school, or continuing education including tuition, room and board, required books and supplies.
Married couples can contribute up to $28,000.00 per year or combine up to five years into one contribution of up to $140,000.00 per beneficiary without gift tax consequences until the account reaches as much as $400,000.00.
The account owner has control over the timing and amount of distributions and the owner may change beneficiary at any time with no tax consequences.
Many states allow tax deduction or credit for investments made to a 529 plan.
529 College Financial Aid calculations basics for factoring the Expected Family Contribution (EFC) are: If the assets are owned by the dependent student or parent, the assets are factored in at the rate of 5.6%. Assets owned by a non-dependent student are factored at 20% and assets owned by a grandparent are not factored into the EFC, but distributions are counted as income.
529 Plans can help high-net worth individuals transfer sizeable amounts out of their estates without gift tax consequences.
About the Author: Charles Marsala is a Financial Advisor with Benchmark Investment Group with Securities offered through LPL Financial, a member FINRA/SIPC. He can be contacted at

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