Joseph Hurley is a partner at Bonadio & Co. and author of a book on 529 plans.

Joseph Hurley, a partner at Bonadio & Co. and author of a book on 529 plans, also known as college savings plans, has made touting the benefits of the tax-advantaged plans to consumers and to the professionals who advise them a full-time crusade.

For CPAs and others who advise clients on financial matters, including the often daunting challenge of saving enough to cover the cost of sending their kids to college, Hurley says that it's crucial to be knowledgeable of all the available options.

"They're a tool that can be used for any client, because there are no income limits," he noted. And the plans provide an added estate tax benefit -- when money is moved from an estate into a 529 plan, the account holder retains control of the funds.

Hurley, who believes the plans are the best way for most people to save for college (hence, the title of his book, The Best Way to Save For College), has even devoted a Web site to the topic, http://www.savingforcollege.com/, of which he's chief executive.

The basic idea behind the plans is that, like a non-deductible contribution to an individual retirement account, the investment grows tax-free. When a qualified withdrawal -- one used to pay for college costs, is made, the earnings portion of the withdrawal is taxed to the student, which saves the account owner on taxes. And, some states may offer additional tax breaks to contributors.

Anyone can take advantage of a 529 plan, and most plans allow a maximum contribution of $100,000 per beneficiary, although contribution limits for some plans go as high as $246,000, according to Hurley.

While 529 plans, dubbed for the section of the Internal Revenue Code that describes them, have existed for more than a decade, they have been relatively slow to gain popularity, probably, according to Hurley, because college planning is such a confusing topic.

"There are so many other incentives and higher education provisions," like the Education IRA, the HOPE Scholarship credit and the lifetime learning credit, Hurley noted. And, until recently, the distribution of the plans was entirely through advertising and direct mail.

"Only recently have brokers gotten in on the act, which has accelerated the knowledge (of the programs)," he said.

But awareness of the plans is picking up, according to Hurley, who offers as evidence the fact that his site attracts more than 100,000 visitors per month.

"The plans are much more powerful than the Education IRA, which has a $500 (annual contribution) limit," Hurley noted. And 529 plans don't affect the ability to claim the HOPE or lifetime learning credits.

Generally, there aren't any income limitations or age restrictions. The donor stays in control of the account, and the beneficiary can usually be changed at any time. Of course, there are exceptions to every rule, so Hurley advises that people check the rules for a specific plan before investing.

There are two types of state-sponsored plans: prepaid tuition plans and college savings plans. So far, 44 states offer one or both types of plans, according to Hurley. Four more have plans in process. Only two states, South Dakota and Georgia, haven't decided to offer the plans.

With a prepaid tuition plan, consumers can lock in current tuition rates for future use by paying now, usually by semester or by year. These plans aim mostly at keeping pace with the rising cost of tuition. According to Hurley, prepaid plans are generally limited to residents of the state sponsoring the plan, and in some cases funds may be limited for use at an in-state public school or for payment of tuition costs only, although he noted that most of the time, the benefits are transferable to private or out-of-state schools.

The more flexible college savings plans are similar to state-sponsored mutual funds; performance determines the account value, so they have more upside potential. The plans typically are run by an outside fund company and invest in mutual funds, and the money can usually be used for tuition, as well as other costs, such as books and room and board, at any accredited college or university in the country. Most of the new plans being created are savings plans, according to Hurley.

Many states offer plans with no state residency requirements, and people can open accounts in as many states as they choose, but Hurley recommends that for most people, accounts in two or three states will suffice.

So, what's the catch? Well, if the money withdrawn isn't used to cover education expenses, an Internal Revenue Service penalty may be imposed, usually 10 percent of the earnings portion of the withdrawal, Hurley warned. And the earnings portion of a non-qualified withdrawal is generally taxed to the account owner, rather than to the student.

Also, while you can transfer the account to another family member if the intended recipient decides not to go to college, currently there's a glitch that prohibits a transfer of funds between cousins, although Hurley expects it be fixed.

-- By Melissa Klein

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