Private student loan lender Sallie Mae has released their yearly “How America Saves for College” report, identifying that many families are looking for opportunities to save for college more so than in previous years. In fact, up to 57% of families in the United States are saving for college ahead of time, an increase of more than 9 percentage points from the previous year.ThinkstockPhotos-474212112

The amount saved by the average family is also higher, above $16,000. However, two thirds of the families surveyed in this project were using investment accounts or traditional savings while only one third were using 529 tax free accounts. Many more millennial families understand the benefits of 529 accounts that can help to minimize estate taxes as well. There are two primary types of 529 plans you may wish to set up for a child or a grandchild; prepaid tuition plans or investment plans.

Since prepaid tuition plans are guaranteed by individual states to be used for in-state tuition, an investment account plan may be more appropriate for your individual situation. Money inside a 529 plan grows tax free for your future child or grandchild’s education. Money can be spent on any qualified expense including fees, board, tuition, books and any other educational expenses including computers. Choosing your plan wisely is the first critical step.

It may be an important component of your estate plan to establish a 529 plan to benefit a child or grandchild in the future while removing the amount from your individual estate. You can open a 529 plan with as little as $50 and generate a monthly contribution automatically or you can also combine the $14000 annual gift tax exclusion up to 5 times in order to make a $70,000 gift to start a college account. Consult with an experienced estate planning attorney to learn more about how 529 plans and other advanced strategies can help you pass on the legacy to your loved ones.

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