Many parents choose to invest money in a 529 account to save for their child’s education. 529 accounts offer individuals the opportunity to invest funds and earn money on those funds over several years. The earnings remain tax-free as long as the money is used to pay college expenses for the beneficiary.
Both states and individual colleges manage 529 accounts. States offer savings plans and prepaid tuition plans. Beneficiaries of 529 accounts offered by the state may choose which college to attend. Individual colleges can only offer prepaid tuition plans. Beneficiaries of 529 accounts offered by an individual college may only use the benefit at particular college. Savings plans operate similar to any investment plan in which the account holder contributes money. That money can be used to offset the cost of a college education. Prepaid tuition plans pay for a specific number of years of college tuition.
The account holder opens the account and maintains responsibility for managing the funds. The account holder chooses whether to invest funds through automatic contributions or as lump sum amounts. Savings plans may offer different investment options. The account holder chooses which type of investment to put the funds into. At times, it may be necessary to change the beneficiary on the account. The account holder coordinates this change with the plan administrator. The account holder’s Social Security number must be included on the 529 plan.
Successor Account Holder
The account holder has the option of naming a successor account holder. A successor account holder remains inactive on the account as long as the account holder is capable of managing the account. If the account holder dies or become incapacitated, the successor account holder steps in and takes over the account holder’s responsibilities. The successor account holder’s Social Security information must be included on the 529 plan.
The account holder names the beneficiary on the account. The beneficiary receives the benefit from the hard work of the account holder. The beneficiary uses the funds to finance his college education after graduating from high school. These funds pay for tuition, textbooks and other materials necessary to attend college. The beneficiary’s Social Security number also must be included on the 529 plan.