August is right around the corner, and kids are getting ready to head back to school. Some of those kids are heading off to college, and families feel the strain of rising tuition costs. Last school year, the average in-state cost for college tuition and fees in Indiana was $7,866!
Many of our clients want to help their loved ones pay for college, and we can help them create estate plans that ensure the money they leave is put to good use. However, if you would prefer to help your children or grandchildren during your lifetime, a 529 plan is a great option. It allows you to start saving for your child or grandchild’s education costs when they are young, and it allows you to contribute toward their college costs while you are still around to see the results!
Here are some quick facts about Indiana 529 plans:
- You invest funds in your name for the benefit of the student.
- The earnings grow tax-free.
- You can make tax-free withdrawals, as long as you spend them on qualified expenses.“Qualified expenses” not only include tuition and mandatory fees, but also books, supplies, and computers.
- You can change the beneficiary from one child to another person who is a family member of the original beneficiary – so if your oldest grandchild doesn’t go to college or doesn’t need all of the money you’ve saved, you can use it for his younger sister instead.
- If you are an Indiana resident, you receive a state income tax credit of 20% of your contribution (up to a total credit of $1,000) per year for contributions made to an Indiana CollegeChoice 529 Savings Plan.
Another nice feature of a 529 plan is that you don’t have to have a lot of money to open an account (you can start with $10), and you don’t have to go through a brokerage firm or bank to open it. For more information about the Indiana CollegeChoice 529 plan, check out this link.