529 Plans: Types Of Plans
  1. 529 Plans: Introduction
  2. 529 Plans: Types Of Plans
  3. 529 Plans: Eligibility
  4. 529 Plans: Contributions
  5. 529 Plans: Distributions
  6. 529 Plans: Conclusion

529 Plans: Types Of Plans

By Denise Appleby

There are two types of 529 plans:

  • Prepaid tuition programs, which may be offered by the state of an eligible educational institution. Prepaid tuition programs allow for the advance purchase of credits for the designated beneficiary. These are usually established during enrollment periods established by the state of the eligible educational institution.
  • College savings plans allow contributions to be made to the account on behalf of the designated beneficiary. These can usually be established at any time, including immediately after the designated beneficiary is born.
Individuals would review the feature and benefits of both types of 529 plans to determine which is more suitable for the designated beneficiary.

The designated beneficiaryunder a 529 plan is the student the plan is established for. The designated beneficiary can be changed to an eligible person. Typically, the designated beneficiary is changed if the current designated beneficiary will not need the funds in the 529 plan for eligible education expenses. If a state or local government or certain tax-exempt organizations purchase an interest in a 529 plan as part of a scholarship program, the designated beneficiary is the person who receives the interest as a scholarship.

For purposes of a 529 plan, an eligible educational institution is any college, university, vocational school, or other post-secondary educational institution eligible to participate in a student aid program administered by the Department of Education. This includes virtually all accredited public, nonprofit and proprietary (privately owned profit-making) post-secondary institutions.

Certain educational institutions located outside the United States also participate in the U.S. Department of Education's Federal Student Aid (FSA) programs.

Individuals should check with the educational institution to determine if it is an eligible education institution for 529 plan purposes.

529 Plans: Eligibility

  1. 529 Plans: Introduction
  2. 529 Plans: Types Of Plans
  3. 529 Plans: Eligibility
  4. 529 Plans: Contributions
  5. 529 Plans: Distributions
  6. 529 Plans: Conclusion
RELATED TERMS
  1. 529 Plan

    529 is a category of plans that provide tax advantages when saving ...
  2. Absolute Beneficiary

    A designation of a beneficiary that can not be changed without ...
  3. Designated Beneficiary

    The person who determines how long the retirement plan will survive ...
  4. 529 Prepaid Tuition Plan

    A tax-advantaged method for paying future college tuition costs ...
  5. Prepaid Tuition Program

    One of the two major types of 529 plans. Prepaid tuition plans ...
  6. Lifetime Learning Credit

    A provision of the U.S. federal income tax code that lets parents ...
RELATED FAQS
  1. What is the best way to save for private school expenses? A 529 plan, a Coverdell ...

    If the goal is to put the money in the plan towards private school expenses, then the Coverdell Education Savings Account ... Read Answer >>
  2. Can 529 plans be used to transfer wealth to other family members if the original ...

    Yes, the 529 plan (also known as a "qualified tuition program") allows you to distribute and roll over funds from one 529 ... Read Answer >>
  3. Can an IRA beneficiary roll the IRA over into another account and designate another ...

    It depends on the provision of the IRA plan document. Some (though very few) do not allow the designation of successor beneficiaries. ... Read Answer >>
  4. If I pass away, will my retirement plan go to my spouse tax free?

    If your spouse is the designated beneficiary of your retirement plan, the assets will pass to him or her tax free. The general ... Read Answer >>
  5. My uncle died recently. He designated my mother and father as his beneficiaries in ...

    It depends. If the retirement plan is a qualified plan, then the plan administrator would refer to the plan document to determine ... Read Answer >>
  6. Can the non-spouse beneficiary of an IRA name a successor beneficiary?

    Whether the beneficiary of an individual retirement account (IRA) can name a successor beneficiary (second generation beneficiary) ... Read Answer >>
Trading Center