529 Plans Also Help Cut Estate Taxes
As college costs have soared, way outpacing the small gains in family income of the past decade, more and more families have turned to Section 529 college savings plans where gains are tax-free when withdrawn to pay for school.
A qualified tuition plan (QTP or 529 plan) is a program set up to allow individual’s to pay for the qualified higher education expenses of a designated beneficiary either through a prepaid tuition program or a college savings program. A QTP can be established and maintained by a state, an agency or instrumentality of a state, or by the eligible educational institution eligible to participate in a student aid program administered by the U.S. Department of Education, including a college, university, vocational school, or other post-secondary institution. The program itself is exempt from all federal income tax if certain requirements are met. See §1,805.10 for a discussion of the requirements of QTPs.