What are the advantages of a 529 college savings plan?
There is no limit on contributions but some states tend to limit contributions once the plan assets have reached a defined maximum (typically $230,000 - $500,000). Under a special election, you may make contributions per beneficiary in a single year without triggering a federal gift tax by accelerating five years' worth of contributions - based on the applicable gift tax exclusion amount*.
Assets are professionally managed by fund managers selected by the state. Participants can choose from two to almost 30 mutual fund-type investments. Control of the account remains with the contributor regardless of the age of the beneficiary.
* This gift is viewed as an accelerated gift over five years. Any other gifts to the same beneficiary by the contributor within five years may result in a federal gift-tax liability. If the contributor dies within the five-year period, a prorated portion of the contribution may be included in his or her taxable estate for federal estate tax purposes.