What types of tax-free savings plans are available to assist me in saving for my childrens college funds?
A 529 plan is a tax-free investment account established to pay for a family member beneficiary’s higher education expenses. Such expenses include tuition, books, supplies, fees, and equipment which are necessary to attend graduate school, college, and some vocational institutions. For any given beneficiary, an $11,000 annual contribution may be made to a 529 account free of gift tax. You may also make a $55,000 contribution ($110,000 for married couples making a joint gift) and face no gift tax consequences if you make no additional contributions for five years, and you live five years following the contribution. Following the contribution, the account grows tax free, and and no income tax is assessed on the funds paid from the plan for qualified higher education expenses. Note that because a 529 plan is essentially a securities investment, one must be selective in choosing a plan manager. A second type of educational savings plan is a Coverdell account. You may contribute up to $2,000
