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A 529 plan is an investment account that parents can use to prepare for their children’s college expenses. 529 plans offer certain tax advantages, and some plans allow you to lock in tuition rates years in advance. Investing your money in such a way may seem like an excellent college planning idea, but it’s essential that you put your funds in a trustworthy account. If you are looking for such an account, you may wonder who offers 529 plans legally.
529 plans come in two different forms: prepaid tuition plans and college savings plans. A prepaid tuition plan allows you to begin paying your child’s tuition in advance at a predetermined price, while a college savings plan is an account that holds money for you to use toward any qualifying educational expenses at a later date. Both individual colleges and states are the ones who offer 529 plans for prepaid tuition plans.
College savings plans, on the other hand, can only be offered and operated legally by states.
Before investing in any 529 plan, read the plan’s disclosure statement carefully. To ensure that the plan you choose will provide you with tax advantages, make sure that it meets all of the qualifications described in Section 529 of the Internal Revenue Code. If the plan does not meet these qualifications, its earnings will be subject to federal and state income taxes. Never purchase a plan with a sponsor that isn’t either a state or an institution of higher learning.
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