Utahns, look close to home for 529 savings

Earlier this month, investment research firm Morningstar Inc. once again rated the Utah Educational Savings Plan as one of the top five 529 college savings plans in the country.

Which means now is the perfect time to answer a few 529-related questions I've received lately.

A reader named Gene wrote to say, "I have a 4-month-old granddaughter and want to start a 529 account for her, and I would like to know what you would do and your advice."

Niki wrote that she and her husband might start a 529 plan for their 1-year-old grandson.

"My question to you is, we live in California and our grandson lives in Utah, (so) do we invest in the California 529 plan or the Utah 529 plan? I understand that the college does not have to be in the state that your 529 plan is in. I just wasn't sure if it matters what state the beneficiary lives in."

And Aida wondered about the possibility of transferring savings bonds into a Utah 529 plan. "Please advise me on how to go about doing this. I live in (New York City). I went to an open house at my son's school and the financial aid officer told the parents that (it) is better to have the funds in a grandparent's name. My parents passed on, and I'm the only guardian. If my son's grandmother passed, can I still use her name?"

All good questions, I think. For help with some answers, I contacted Lynne Ward, director of the UESP.

You would expect Lynne to be biased in favor of the plan she directs. But since the UESP is consistently rated among the top 529s in the nation, I think she has the right to boast a bit.

To Gene, Lynne advises that he go ahead and start that 529 account for his granddaughter.

"To me, the primary reason why you would set up a 529 plan is to send the message to the child that, 'We believe in you, and we value your future, and we want to set the expectation that you will go to college. And we'll help you get there,"' Lynne says.

Most states offer their own 529 plans (so-named for the section of tax code that allows them), but the UESP has some features that make it stand out. For example, Lynne says, the Utah plan does not require any minimum deposits or balances.

"We've tried to tailor the program to the Utah family and make it easy for people to save," Lynne says.