Estate planners don’t just help you plan for retirement and for the post-death administration of your assets. They can also be a valuable source of information on other financial savings tools, as many of these can factor into an estate plan.
Take education savings plans, for instance. Many people might want to put aside money for their children's education. While a child's trust might set aside some income for education, it's not the only way to ensure you've saved for the future of your child or children.
Many states have education savings plans to help parents put aside money for the higher education of their kids. A 529 plan is the most common of these plans.
Named after section 529 of the Tax Code, a 529 plan is a tax deferred contribution plan. States run their own 529 plans and each state's plan may be different. The plans share some resemblance to 401K plans, as they tend to be administered by an experienced financial institution.
Money in a 529 plan grows tax free and can be withdrawn for educational purposes without incurring federal income tax. The money is considered as part of the parents's assets and as such, has no real impact on determining a child's eligibility for financial aid.
Funds in a 529 account are also transferable to another child. If, however, the parents decide to withdraw the money to use it for other purposes, then they will incur a penalty of ten percent, in addition to the tax they would have to pay on that amount.
One good thing about 529 plans is that anyone can participate, regardless of income. Compare this to the Coverdell plan which is open to those earning under a specified adjusted gross income.
There are more than one type of 529 plans and each state has different rules. Have a look at the New York State Comptroller's website for more information on 529 plans in New York.