The week of 5/29 is a good time to think about the 529 plan. With more than 11 million accounts and over $200 billion invested, 529 plans are one of the most popular vehicles used to save for college.

Using a 529 plan can be complex and many people may not be aware of all of the features they offer. These five insights can help strengthen your total understanding of 529 plans and the benefits they can provide you and your loved ones.

1. 529 Plan Overview

Also known as qualified tuition programs (QTP), a 529 plan is operated by a state or an education institute as a way to help save for future college or post-secondary education costs. To help maximize the impact of your savings, 529 plans are treated favorably from a tax perspective.

2. Tax Treatment

529 plans are treated similarly to Roth IRAs. Contributions are made with after-tax dollars and aren’t deductible on your federal taxes, but they do potentially appreciate tax-free, and distributions aren’t taxed as long as the money is used on qualified education expenses. Distributions not used for qualified education will be taxed as regular income and carry a 10% penalty tax.

Even though contributions made to a 529 plan aren’t deductible on your federal taxes, many states do allow you to deduct at least a portion of contributions made to a 529 plan. Make sure you research whether your state offers any tax benefits on contributions and what the rules and restrictions are in order to be eligible for them.

3. Qualified Education Expenses

The IRS considers a fairly broad range of expenses when it comes to what constitutes a qualified education expense. Common qualified expenses include books and supplies, room and board (for students enrolled at least half-time), tuition and equipment required for attendance. Some notable expenses that aren’t covered include application costs, transportation expenses, insurance and club/activity fees. Check with the IRS if you are unsure whether a certain expense is qualified.

4. Plan Ownership

The assets inside of a 529 plan are controlled by the person who establishes the account (commonly referred to as the “owner”), not the beneficiary. The owner can switch who the beneficiary is and may be able to transfer ownership of the 529 plan to another party. The critical thing about ownership of a 529 plan is the fact that FAFSA treats distributions differently depending on who the owner is. Generally speaking, a 529 plan owned by a grandparent is treated much less favorably than a 529 plan owned by a parent. For grandparents who currently own a 529 plan or are thinking about opening one, plan ahead to limit a possible reduction in your grandchild’s financial aid.

5. Accelerated Gifting

A 529 plan isn’t just a useful tool for saving for college—it also can be used for estate planning purposes. For those who are looking to quickly reduce the size of their estate, the IRS allows you to gift up to five years’ worth of contributions to a beneficiary’s 529 plan at once. With a gift tax exemption of $14,000 in 2015, you can contribute up to $70,000 to a beneficiary at one time without triggering a gift tax exemption. The opportunity to accelerate contributions can be used on multiple beneficiaries during the same year. For instance, if you have three grandchildren, you could gift up to $210,000 ($70,000 per child) to their 529 plans.

Adding a 529 plan to your college savings plan can provide significant long-term tax and estate planning benefits. Fully understanding the rules your 529 plan has can help you ensure you’re making the most of it.

Prior to investing in a 529 plan, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

Wealth Enhancement Group is a Greater Minneapolis-based independent wealth management firm offering comprehensive and customized financial planning and investment management services. Established in 1997, Wealth Enhancement Group uses a team approach with a focus on simplifying their clients’ financial lives and has offices nationwide.