The tax benefits offered by college savings vehicles can greatly affect how much money can be accumulated towards the cost of a college education. Tax-deferred savings Plans that allow you to defer taxes on investment gains give your money even more of a chance to grow. Tax-deferred growth can make quite a difference in the value of your account. With 529 Plans, qualified withdrawals are taxed at the beneficiary's typically lower rate. Review the Income Tax Benefits row on the Plan Comparison Chart to compare.
Estate taxes are among the highest levied.
Many financial planners recommend gifting money while you are alive to reduce the value of your estate at your death. All contributions to a 529 Plan are considered completed gifts and are out of your federal taxable estate. In addition, any earnings on the assets are also not included in your estate. What makes this plan unique is that you still maintain control over the money and can take it back if needed. You can also change the beneficiary at any time.