Since Congress made 529 plans tax-exempt, instead of merely tax-deferred, in last spring's tax law, they have experienced a surge in popularity and financial institutions are moving quickly to create and distribute the college savings product. Ralph J. Constantino, CEO of Schoolhouse Capital, said the 529 plan is still in its infancy but is already a very hot product for banks. “The way the IRA and 401(k) are ingrained with the conservative bank investor is the way that the 529 plan is becoming,” said Constantino. Advisors and plan sponsors say the reason for the growth in 529 plans is due to its structure as a college savings vehicle with extensive investment options and low minimum investment requirements that can also be a tax shelter or an estate-planning tool. Of the 50 states, 36 offer 529 plans. Ten states, including the District of Columbia, are currently developing such plans. (American Banker, December 17, 2001, 12.17.01.1)CPAScott
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