Sec. 529 plans.

• Author: Ellentuck, Albert B.

Facts: Jack Jones, a longtime client, has a two-year old daughter who will eventually attend college. Jack wants to begin saving for college currently; thus, he asks his tax adviser various questions about Sec. 529 plars. Issue: How can Jack compare these plans?

Analysis

Exhibit 1 below and Exhibit 2 on p. 700 contain useful tools for reviewing Sec. 529 plans. Exhibit 1 is a checklist of questions to ask in examining a plan; Exhibit 2 is a worksheet for comparing up to three such plans side by side.

Information on individual state plans is available by calling (877) 277-6496 or by visiting www.college savings.org.

Exhibit 1: Sec. 529 plan checklist Client: Date: Prepared by: Instructions: This checklist includes questions to consider before investing in a Saec. 529 plan. Tax advisers can use the checklist as a tool to assist clients in choosing the best plan to meet their needs. Information needed to complete the checklist is normally found in the plan program materials, which can be oblained either by calling a state plan administrator or accessing a plan's website. Tax advisers should complete the checklist by responding to each question and indicating whether the particular plan feature's terms ore favorable (F), unfavorable (U),neutral (N) or not applicable (NA). Using the codes will enable practitioners to quickly scan a completed checklist and get an overall impression of the plan. Determining whether an item is F, U or N will depend on how the feature compares to that of most state plans and to the client's particular needs. State program: Rate Question Response/commets F U N/NA General enrollment 1. Who can open an account (parent, child, grandparent, etc.) and who is treated as the account owner? 2. Must the student or account owner be a state resident to participate in the plan? 3. Are there any age restrictions on who can open on account? 4. At which schools can account funds/benefits be used (e.g., in-state only, etc.)? 5. What happens if the beneficiary does not attend college? 6. What happens to account ownership in the event of the owner's death or divorce? 7. What happens if the beneficiary dies or becomes disabled? 8. Can the owner get a refund of the account? If so, what are the refund's terms? 9. What happens if the child receives a scholarship? 10. Is there a limit on how long funds can remain invested in the plan? 11. Which college expenses are included in the plan (e.g., tuition, room and board, fees, graduate school...