529 California

The State of California does not offer you 529 prepaid plans but it does offer you the best of the provisions of the savings plans. California's college 529 savings plans are the ScholarShare advisor college savings plan and the ScholarShare college savings plan. Both the plans are managed by Fidelity Investments, under the guidlines of state of California.

By investing in California's 529 College savings plans, you save funds for the future education expenses of your children. Currently, educational expenditures are inflating at a very high rate, thus it becomes a must for you to invest in any of these plans and secure qualified education for your children.

Banks, universities, colleges, and mutual fund companies have been granted permission to create their own 529 college savings plans. In California, these plans are invested in through Fidelity Investments. They offer two plans of savings: the Aged based category and Custom category, which both have different plans and features.

Highlights of California's savings plans

1. The saved funds can be used to pay for tuition fees, books, room and boarding costs. All this is done at today's rates and the value of the savings increases at the rate similar to the rise in college costs.

2. No income tax deduction is provided by the state of California for the people contributing in the 529 plans.

3. A gift tax exemption is provided up to $11,000. If you make more than 5 gifts, this will attract a penalty though.

4. If withdrawals of earnings are made to pay for qualified education costs, it is exempted from the state income tax.

5. No time limit is mentioned for keeping the funds in an account without withdrawing them

6. You can open a 529 account in your name or in a living trust.

7. After the 2001 changes in the act, the investors have more control of their account.

A word of caution: With so many advantages and tax benefits, the 529 plans have some disadvantages as well. These lie in the plans induced by the agencies administering them. They have some typical plans and processes where you'll lose a considerable amount in the payment of maintenance fee and other charges. Ask every sort of questions to the planner wherever you have doubts, so that you don't end up buying a bad plan. Comparisons are necessary before you decide a plan for your child or any other beneficiary.

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