NU Online News Service, March 11, 4:08 p.m. – Manulife Financial Corp., Toronto, says Section 529 college savings plans are catching on with U.S. financial advisors

Seventy-four percent of the financial advisors it surveyed in December 2001 said they were selling 529 plans, and advisors say the clients who buy the accounts make their decisions quickly.

Sixty-five percent of the clients who opened 529 accounts did so within two weeks after discussing the program with their advisors, advisors reported.

Manulife was expecting high-income clients to flock to the program to take advantage of the generous tax breaks and estate-planning opportunities it offers. But company researchers found that 51% of the account holders are parents and 57% have annual household incomes between $50,000 and $100,000.

Only 39% of the account holders are grandparents, and only 29% have incomes over $100,000, Manulife says.

Section 529 of the federal Internal Revenue Code, the section that authorizes the college savings plans, lets each state set up its own program. Investors can defer federal income taxes on contributions to a program sponsored by any states. In many cases, investors who contribute to their own state’s program can also defer state income taxes.

Beneficiaries can withdraw assets for qualified tuition and living expenses without paying federal income taxes on the withdrawals.

Manulife is interested in the program because it has been competing with other large financial services companies for contracts to help states run and market their 529 programs.