Sec. 529 plans.

Facts: Jack Jones, a longtime client, has a two-year old daughter who will eventually attend college. Jack wants to begin saving for college currently; thus, he asks his tax adviser various questions about Sec. 529 plars. Issue: How can Jack compare these plans?

Analysis

Exhibit 1 below and Exhibit 2 on p. 700 contain useful tools for reviewing Sec. 529 plans. Exhibit 1 is a checklist of questions to ask in examining a plan; Exhibit 2 is a worksheet for comparing up to three such plans side by side.

Information on individual state plans is available by calling [phone] or by visiting www.college savings.org.

Exhibit 1: Sec. 529 plan checklist

Client:                                           Date:

Prepared by:

Instructions: This checklist includes questions to consider before
investing in a Saec. 529 plan. Tax advisers can use
the checklist as a tool to assist clients in choosing the best plan to
meet their needs. Information needed to complete
the checklist is normally found in the plan program materials,
which can be oblained either by calling a
state plan administrator or accessing a plan's website.

Tax advisers should complete the checklist by responding to each
question and indicating whether the particular
plan feature's terms ore favorable (F), unfavorable (U),neutral (N) or
not applicable (NA). Using the
codes will enable practitioners to quickly scan a completed checklist
and get an overall impression of the plan.
Determining whether an item is F, U or N will depend on how the feature
compares to that of most state plans
and to the client's particular needs.

State program:

                                                   Rate
Question                          Response/commets     F    U    N/NA

General enrollment

1. Who can open an account
(parent, child, grandparent,
etc.) and who is treated as
the account owner?

2. Must the student or account
owner be a state resident to
participate in the plan?

3. Are there any age restrictions
on who can open on account?

4. At which schools can account
funds/benefits be used (e.g.,
in-state only, etc.)?

5. What happens if the beneficiary
does not attend college?

6. What happens to account ownership
in the event of the owner's death
or divorce?

7. What happens if the beneficiary
dies or becomes disabled?

8. Can the owner get a refund of
the account? If so, what are the
refund's terms?

9. What happens if the child
receives a scholarship?

10. Is there a limit on how long
funds can remain invested in the
plan?

11. Which college expenses are
included in the plan (e.g., tuition,
room and board, fees,
graduate school, etc.)?

12. Does the plan allow accounts set
up under the Uniform Gifts to Minors
Act/Uniform
Trusts for Minors Act?

13. Does the plan allow a trustee to
establish an account?

Contributions

14. What are the minimum and
maximum contributions allowed
(periodic, annual and cumulative)?

15. Can contributions be made
through automatic electronic
funds transfers from payroll
or bank accounts?

Fees and expenses

16. What are the enrollment and
maintenance fees?

17. What fees are charged by the
investment managers?

Investments

18. What are the investment
options? Are these compatible
with the client's risk tolerance?

19. Who is the plan investment
manager?

20. Does the plan permit account
owners to change investment
options once a year
(following Notice 2001-55)?

Distributions

21. How are distributions paid
(e.g., directly to the school,
monthly, etc.)?

22. Does the plan impose a penally
on nonqualified distributions in
addition to the Federal
10% penalty?

Rollovers and beneficiary changes

23. Are changes in beneficiary
allowed? If so, what are the
procedures and who is
eligible us a new beneficiary?

24. Are rollovers allowed to/from
other state plans; what are the
terms?

State considerations

25. Are contributions deductible
for state income tax purposes?
(If so, is there a
deduction limit?)

26. Are account earnings subject to
state income tax; if so, when?

27. Is the account considered when
determining eligibility for state
financial aid
purposes?

Exhibit 2: Sec. 529 plans---comparison worksheet

Client:                                           Date:

Prepared by:

Instructions: This worksheet allows tax advisers and/or clients to
easily compare key elements of up to three Sec. 529 plans,Information
to complete this worksheet
typically can be found in a plan's enrollment package or by visiting
the plan's website.

Name of state program
General
   Open to nonresidents
   Refund policy/penalty
   Educotional institutions included
   Other:

Contributions
   Maximum
   Minimum
   Electronic deposit
   Other:

Investment matters
   Adviser/manager
   Age-based options
   Static options
   Other:

Fees and expenses
   Enrollment fee
   Annual maintenance fee
   Underlying investment fee
   Other:

State tax considerations
   Allowable state deduction
   Earnings taxable
   Excluded for state financial aid
   Other:

Other considerations