- 1). Sell your stock. Instruct your financial adviser to sell your stock, or sell your stock online if your firm allows you access. Make sure to note the total proceeds of the stock sale and the date when you will receive your proceeds.
- 2). Review 529 plan options. Numerous 529 plans are available for purchase, and while they share similar characteristics, they are not all the same. Some plans offer special state-specific tax advantages, while others have lower costs or more diverse investment options. You may consider working with a financial adviser knowledgeable in this area to help you make the most appropriate decision.
- 3). Establish a 529 plan. Most financial services firms will help you set up a 529 plan, which involves paperwork similar to establishing a retirement plan. You will have to provide basic personal information, such as your name, address, date of birth and social security number, as well as your investment experience and objectives.
- 4). Choose your beneficiary. Your beneficiary is normally the child who will use the 529 proceeds for college, but you can choose anyone you wish as your beneficiary. One of the main advantages of the 529 plan is its flexibility. Unlike custodial accounts, which legally belong to the designated child, 529 plans are the possession of the owner---and the owner can change the beneficiary at any time.
- 5). Select an investment strategy. Most 529 plans offer a range of investments categories to choose from, such as conservative or aggressive. Many also offer age-based investment strategies, wherein funds are invested most aggressively when the beneficiary is younger and become more conservative as the beneficiary ages.
- 6). Check for plan contribution limits. Maximum contribution limits for 529 plans vary from state to state, but as of 2010 averaged approximately $200,000 over the lifetime of the account. Contributions to 529 plans are considered gifts, so most contributions should be limited to the amount of the annual gift tax exclusion amount, or $12,000 as of 2010. However, 529 plans allow the contribution of 5 years of annual exclusion gifts at once, meaning an individual could contribute $60,000 while still avoiding gift taxes.
- 7). Invest your stock proceeds. Either transfer the proceeds of your stock sale directly to your 529 plan, or have your firm send you a check.
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