College Funding Account
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code. Investing in a 529 plan may offer college savers special tax benefits. Earnings in 529 plans are not subject to federal tax, and in most cases, state tax, so long as you use withdrawals for eligible college expenses. Enrollment for this type of plan is open all year, has no age limit making it open to both adults and children. The 529 Plan Covers all "qualified higher education expenses," including:
- Tuition
- Room & board
- Mandatory fees
- Books, computers (if required).
The UTMA (Uniform Transfers to Minor's Act) allows an adult to set up a custodial account for a minor, who then permanently owns any assets placed in the account. You may act as custodian of the account or name another adult to serve in that role. Investing through a UTMA account often has a sizable tax benefit over investing in a parent's name. The funds in this type of account can be used for any desired expense.