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With the passing of legislation that created Section 529 of the Internal Revenue Code, there became a very popular and potentially efficient way for individuals to save for future college expenses. When planning for the future college education of children, grandchildren or others, you may want to consider the use of a 529 plan, as they are now called. These plans are set up both on an individual level as well as by business owners as an added employee benefit. Some of the benefits of 529 plans are:
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Tax-free growth of the plan.
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Distributions for qualified college expenses (tuition, books, room board and others) are currently tax-free on the federal level, as well as on the state level in certain cases.
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In many cases, contributions to these plans have positive effects on current taxes.
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Maximum flexibility — High contribution limits in certain cases and no income limits or age limits.
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Despite the fact that the contribution to a plan is a completed gift and is removed from the estate of the account owner, he or she still controls the disbursements and beneficiary.
Lincoln Financial Advisors has access to over 15 different sponsors of 529 plans, and can sell these plans to residents of all 50 states. Please contact a Lincoln Financial Advisors representative to discuss the use of a 529 plan to assist you in your college expense planning.
These tax benefits are scheduled to expire on December 31, 2010, unless Congress takes action. Non-qualified withdrawals may be subject to taxes and an additional 10% federal penalty on any earnings. Please call for a program brochure that contains complete information including risks, fees and expenses. Always read it carefully before investing.
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