While contemplating future planning, a major concern
for a great number of people is how to pay the enormous cost of their
children’s higher education.

529 plans are tax-advantaged because the earnings growth
on the contributions within the account appreciate free of income tax.
Additionally, withdrawals taken to pay for qualified higher education expenses
are also tax-free, with such expenses being broadly defined to include tuition,
room, board, books and computers. 529 plans also offer flexibility as they are
not child specific. That is, if one child receives a full scholarship to attend
college, the funds set aside in that child’s 529 plan may be used for other
children.
Another major advantage of this plan is the asset
protection it offers. The Florida Statutes protect 529 plans from the claims of
creditors, including creditors of the account owner and creditors of the beneficiary.
While such plans are beneficial, it is important to
note that just like any other investment product; performance is subject to
market risk. Additionally, a 10% penalty may be imposed if assets are removed
from the account for purposes other than a qualified education expenses.
Although the market risk argument can be made, it is
undeniable that 529 college savings plans offer an exceptional planning mechanism
for college savings, while also keeping a large share of your assets protected
from creditors.
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