From Dr. David Eifrig, MD, MBA in Retirement Millionaire Daily:
This is one of the easiest ways to shelter assets for your children or grandchildren… and save a bundle on taxes while doing so.
This varies from state to state, but it – generally – allows you to…
Contribute money to a special account to invest in stocks, bonds, or money-market funds (and often get a break on your state taxes)… Grow your investments tax-free… And withdraw the earnings tax-free to pay for qualified higher-education expenses – like tuition, fees, books, computer equipment, and room and board.
It’s called a 529 plan… created by Congress in 1996 as a way for families to invest for college expenses.
All 529 plans are sheltered from federal capital gain taxes… And many states let you deduct your 529 plan contributions on your state income tax return, up to your state’s limit.