A Section 529 Plan (named for the Internal Revenue Code establishing these accounts) may be a great way to not only help your children or grandchildren with their education but also could be a great estate planning tool. With a 529 plan, you initially fund it with a “gift.” The plan will have a named beneficiary but you can change the beneficiary any time. While the gift is made with after tax dollars, any gains over time will be tax-free if used for education.
What if you need that money for your own expenses, medical or otherwise? Unlike most “gifts” you can reclaim the money at any time. you will have to pay taxes on the gain and a 10% penalty but you may still be ahead of the game.
Note: every state sponsors a 529 plan but you are not required to use any particular plan. ( I used the Nevada plan.) You can find more information here at SavingforCollege.com. However, we recommend that such a plan involve your financial planner and estate planning attorney. We are happy to help and we will work with your financial planner or we can recommend one.