Section 529 savings accounts more attractive now
December 1, 2006
Here’s some good news for those saving for a child’s education. The recent passage of the Pension Protection Act of 2006 (“PPA 2006 “) makes Section 529 College Savings Accounts a more attractive way to save for a child’s education by making tax-free withdrawals a permanent benefit. The change comes on the heels of recent adjustments to the tax structure of custodial accounts, which make Uniform Gift to Minors Act and Uniform Transfer to Minors Act accounts less attractive than before. Now:
• Funds withdrawn from 529 accounts are income tax free so long as they are used for qualified higher education expenses (i.e.: room and board, tuition, supplies).
• Same-beneficiary rollovers from one state plan to another are permitted, providing 529 account holders with greater flexibility to invest in the plan appropriate for their needs.
• First cousins are treated as family members for beneficiary changes, a change that some grandparents who are funding education for their grandchildren may find attractive.
If you have young ones, or you’re currently saving in a custodial account, talk with your financial and tax advisors about the benefits of 529 College Savings Plans.
For more information, e-mail me at: firstname.lastname@example.org or call 689-8704. Smith Barney is a division of Citigroup Global Markets Inc. Member SIPC.
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Smith Barney does not provide tax and or legal advice. Please consult your tax and or legal advisors for such advice.
• William Creekbaum, MBA, CFP, a Washoe Valley resident, is senior investment management consultant of SmithBarney, a financial services firm serving Northern Nevada.
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