What is "IRS section 529"?

IRS section 529 or Qualified Tuition Programs (QTP's) are found under Title 26, Subtitle A, Chapter 1, Subchapter F, Part VIII, Section 529 of the Internal Revenue Code or "IRC". It is considered the most complicated and hard to read section of the Code and a good treatment for insomnia. This section deals with special tax breaks for families, hence the "insomnia effect".

Parents who desire to overcome the skyrocketing tuition costs can utilize IRS section 529 to start saving early for their children's school expenses. Parents have a direct control over how and where their money is being invested. Under the college savings plans investors are not subject to any minimum income restrictions or area-specification where savings plans are concerned.

The Plan does not restrict participation eligibility; anyone can participate regardless of income. Participants name the beneficiary of the account and he will be the one using the money for educational expenses. The owner of the account can change the beneficiary at any time and maintain control of the account for the purpose of determining assets for the expected family contribution for college expenses.

Participants can contribute up to $13,000 per person for each beneficiary they have without having to pay a federal gift tax. Married participants can contribute a total of $26,000 per beneficiary. Participants can contribute up to $335,000 per account. The value of the account may rise above this amount because of increases in the investments but once this amount is reached or surpassed participants can no longer contribute to it.

One of the benefits that attract families to the 529 plan is the friendly tax treatment it offers. Funds withdrawn for educational expenses are not subject to Federal tax and some states allow the participant/investor to deduct the contributed amount from state tax.

Generally speaking there are two types of 529 plans -Prepaid plans and Savings plans. A Prepaid Plan is effective when one wishes to buy tuition credit at the present rate to be used later and the Savings Plan is dependent solely upon the market performance of principal investments. Most 529 savings plans offer age-based asset allocation choices where the underlying investments become more conservative as the recipient approaches the college-going age.

I can go on and on about the pros and cons of the 529 Plan but I would like to shift gears here and look at the 529 Plan treatment in a bankruptcy proceedings.

A 529 college-savings plan assets are not exempt under bankruptcy law if it is held for less than one year. The law exempts 529 assets held for at least two years. If assets are held between one to two years the exemption is limited to $5,000.00. In other words, individuals who participate in 529 Plans and find themselves in need for bankruptcy protection should look carefully at how long their 529 Plans have been in effect before deciding to file.

Article provided by George R. Belche, Attorney at Law, LLC

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Economic Stimulus Package Will Enhance 529 Plans

/PRNewswire/ -- The College Savings Plans Network (CSPN), an affiliate of the National Association of State Treasurers (NAST), announced today that the economic stimulus bill before Congress today contains a significant enhancement to Section 529 college savings plans. CSPN worked closely with leaders in Congress to allow families to use money from 529 college savings plans to purchase computers and related technology. Until enactment of this legislation, these college savings accounts could be used to pay for computers only if they were required by the college or by a specific degree program or course.

"Given the increasing technological needs of today's students, it makes sense for computers to be allowed as a qualified expense under Section 529 plans. The reality is that any student who does not have a computer will find it increasingly difficult to succeed in college and will find their skills compromised as they enter the workforce," said Jackie Williams, executive director of the Ohio Tuition Trust Authority, and Immediate Past Chair and spokesperson for CSPN. "We applaud the President, Senator Max Baucus, Chairman of the Senate Finance Committee, and the Congress for continuing to provide leadership on education issues by working to improve Section 529 plans to help American families save and use these important plans for their children's higher education expenses."

Founded in 1991, the College Savings Plans Network (CSPN) is an affiliate of the National Association of State Treasurers (NAST). CSPN is a non-profit association representing states who administer Section 529 college savings and prepaid plans. One of the Network's primary purposes is to educate families about the importance of saving for college and the benefits of Section 529 plans. Additionally, CSPN monitors federal activities and promotes legislative and regulatory changes to enhance Section 529 plans.

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Make Holiday Gift-Giving Easy This Year By Contributing to the Path2College 529 Savings Plan for Your Loved Ones

(BUSINESS WIRE)--Are you looking for the perfect holiday gift this year? Something that is simple and that you can get without even leaving the comfort of your home, yet a gift that is meaningful and lasts a lifetime? Then what better way to make a long-lasting difference for your child or grandchild than opening or contributing to the Path2College 529 Savings Plan for your holiday gift this year.

“The gift of a college education is priceless, it lasts a lifetime, and every penny saved today can make an impact in your loved one’s financial future,” said Chuck Penuel, Director of the Path2College 529 Plan. “Research by the College Board says that an individual with a four-year college degree will earn approximately $1 million more than a high-school graduate over the course of a lifetime. That means saving for college today could be one of the best holiday shopping decisions you can make to help a young person you love.”

Penuel said that one of the easiest ways to help save early for the future costs of college tuition and other qualified expenses, such as certain room and board and books and fees, for colleges in Georgia and nationwide, is through the Path2College 529 Plan. The plan, which is offered by the State of Georgia and managed by TIAA-CREF, offers seven investment options, low annual asset-based fees, and no sign-up, maintenance or third-party sales fees. Any earnings in the Path2College 529 Plan are federal income tax-exempt, and withdrawals for these qualified expenses are also tax free.

“The Path2College 529 Plan is easy to use and understand, and it makes gift-giving this holiday season simple,” said Penuel. “It is easy to contribute to an existing account or to open a new account. And with the experience of TIAA-CREF, and a program that has almost 100,000 accounts and over a half billion in assets, Georgia families can feel more secure in choosing the Path2College 529 Plan for their college savings.”

At www.path2college529.com, anyone can start an account for a beneficiary or contribute to a loved one’s account by printing a personalized gift certificate to present to the recipient. Simply go to the Web site, and click on Print a Gift of Education Certificate. Print and fill in the Certificate and then give your contribution and the Certificate to your loved one. Or, call (877) 424-4377 and one of our college savings specialists will assist you. An account can be started or contributed to in amounts as small as $25.

Once an account is established, additional contributions can be made to the account through check or electronic funds transfer. You may contribute as little as $25 per investment option, and you can establish convenient monthly, semi-monthly or quarterly contributions all year-round from your checking or savings account.

“There are numerous benefits to 529 plans,” said Penuel. “If a financial emergency occurs, you can take the money out of the account, with some penalties of course. Your non-qualified withdrawal is subject to federal income taxes as well as an additional 10% federal tax, but it is still accessible if it’s needed. A Path2College 529 Plan account is also transferable, so if your child decides not to attend college, you can transfer it to another eligible member of the family. It’s an excellent program to help your loved one get on the right path. And as the account owner, the parent retains control of the account.”

For more information on the Path2College 529 Plan, visit: www.path2college529.com or call (877) 424-4377.

Consider the investment objectives, risks, charges and expenses before investing in the Path2College 529 Plan. Please visit www.path2college529.com for a Disclosure Booklet containing this and other information. Read it carefully.

Before investing in a 529 plan, you should consider whether the state you or your Beneficiary reside in or have taxable income in has a 529 plan that offers favorable state income tax or other benefits that are only available if you invest in that state’s 529 plan.

We are required to notify you that the tax information contained herein is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding tax penalties. It was written to support the promotion of the Path2College 529 Plan. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.

Account value for the Investment Options is not guaranteed and will fluctuate based upon a number of factors, including general market conditions.

© 2008 TIAA-CREF Tuition Financing, Inc., program manager. TIAA-CREF Individual & Institutional Services, LLC, member FINRA, distributes the Path2College 529 Plan.

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Enter for a Chance to Win the Ultimate VIP Fan Experience to the Georgia Tech/UGA Rivalry Game

(BUSINESS WIRE)--The Path2College 529 Plan’s VIP Fan Experience Sweepstakes is still open for a final chance to win the Georgia Tech versus University of Georgia ultimate game package to the rivalry game played this year at Sanford Stadium in Athens, Ga., on November 29, 2008. Entries must be received online by November 16.

The Ultimate VIP game package includes four tickets to the rivalry game on November 29, limousine transportation to and from the game, pre-game hospitality and sideline passes, two game programs, four game t-shirts and a football autographed by either Head Coach Paul Johnson or Head Coach Mark Richt.

Anyone who has already registered for the Vanderbilt/UGA or Duke/Georgia Tech game packages will automatically be entered for a chance to win. Georgia Tech and UGA fans that have not registered still have until November 16 to enter for their chance to win. The winner of the Ultimate VIP Fan Experience will be announced on November 17.

The sweepstakes, sponsored by the Path2College 529 Plan, Georgia’s official 529 college savings plan, is open to all Georgia residents*. The contest is free and no purchase is necessary. Visit www.path2college529.com for sweepstakes rules and to register for the drawing.

The launch of the sweepstakes coincided with September’s designation by Governor Sonny Perdue as College Savings Month in Georgia. To kick off College Savings Month, the Path2College 529 Plan teamed up with the football programs at the University of Georgia and Georgia Tech to help raise awareness about Georgia’s 529 college savings plan.

Any funds in a Path2College 529 Plan account can be used for tuition, fees, and other qualified college expenses at virtually all colleges in Georgia and nationwide. Contributions made to an account in the Path2College 529 Plan are eligible for the Georgia state income tax deduction and any earnings grow federal and state income tax free. Withdrawals are also tax-free when used for qualified college expenses.

For more information on the Path2College 529 Plan, or to register for the VIP Fan Experience Sweepstakes, visit: www.path2college529.com. Void where prohibited.

* Sweepstakes is also open to all who were Path2College 529 Plan account owners as of 8/25/08, regardless of state of residence.

Consider the investment objectives, risks, charges and expenses before investing in the Path2College 529 Plan. Please visit www.path2college529.com for a Disclosure Booklet containing this and other information. Read it carefully.

Before investing in a 529 plan, you should consider whether the state you or your Beneficiary reside in or have taxable income in has a 529 plan that offers favorable state income tax or other benefits that are only available if you invest in that state’s 529 plan.

Account value in the Investment Options is not guaranteed and will fluctuate based upon a number of factors, including general market conditions.

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