The money in the plan is controlled by the account owner, not the child. If the child dies or decides to not go to college, the plans can be transferred to another member of the family. See the Tax Status section for more details.
529 QUALIFIED EXPENSES FULL
Some states offer a full or partial tax deduction for contributions to the state’s plan. Favorable state tax status may be limited to the state’s own plan. Prepaid tuition plans are exempt from federal income tax, and are often exempt from state and local income taxes. Section 529 plans are especially good for grandparents, because of the estate planning features. This lets people give the gift of education. However, anybody can contribute to a prepaid tuition plan, including grandparents and friends of the family. Most plans require that either the account owner or the beneficiary be a state resident when the account is opened. The Independent 529 Plan is such a plan offered by a group of private colleges.
Starting in 2004, individual educational institutions may offer their own prepaid tuition plans. The family will be responsible for the difference, if any. If the student decides to attend a private or out-of-state college, the plans typically pay the average of in-state public college tuition.
If the student attends an in-state public college, the plan pays the tuition and required fees.
A few have separate plans for two and four year colleges and for room and board. Currently, prepaid tuition plans are operated by state governments, with the tuition guarantee based on an enrollment-weighted average of in-state public college tuition rates.