Don’t know what to give the children on your holiday shopping list this year? Make a contribution to their 529 plan. If they don’t have a 529 plan – just open one – it is easy to do.
I started two plans for my great nephews, one who is also my godchild. True, it is not a fun toy or clothing that could be currently enjoyed. But let’s face it, they will grow out of clothes in a year and will get bored with the toy even sooner! The 529 plan, however, is a gift that stands the test of time and one that will grow in value and hopefully be very much appreciated once they start thinking about college or vocational school.
You can either contribute to an existing college savings account the parents have, or you can open one with you as the owner of the plan, with the child as the beneficiary,(which you can change at any time. ) The owner of the plan retains control of the funds, and can disburse them when appropriate for higher education expenses (this includes not only tuition and fees, but also books, room and board and other required educational expenses.)
And you can contribute up to $14,000 per person as a tax free gift each year. So, if you looking to reduce your estate in any way, giving the gift of education is a great way to do so.
Michigan’s 529 savings plan allow a single individual to deduct up to $5,000 or a joint filer up to $10,000 each year from their income tax return – just another added bonus! Go to www.misaves.org to open a plan either on-line or print the forms to complete and mail in. The minimum contribution to start a plan is only $25.
If you will be contributing to a plan that is already established, the owner of the plan can send you an “invite” to contribute on-line/electronically, or you can send in your payment, by making your check payable to “Michigan Education Savings Plan” and mail to: Michigan Education Savings Program, P.O. Box 55925, Boston, MA 02205-5925. Get the account number from the parent and put in the memo field of the check.
If the child you would like to make a contribution to lives out of state and has an existing plan there, you should also be able to make a contribution to that plan by getting the information from the plan’s account owner, . .
As far as I am concerned this is the best holiday gift you can give a child. And remember, if you want to have to contribution count towards 2013, you must have the contribution in by December 31st!