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2/15/2012 5:33 PM ET

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By Liz Weston, MSN Money

These tax-free programs, run by states, can be a good option for those who want to build up a college-savings account. But you need to know which ones are worth considering.

State-run 529 college savings plans are getting better.

They're reducing fees, improving investment options and reporting better performance. These programs, which allow parents and others to invest in tax-free accounts to pay for college, are benefiting from closer supervision by many of the states, which are negotiating better terms with the investment companies that administer them. For the first time, no plan wound up in Morningstar's "bottom" rank in the research company's most recent review.

"The days of really stinky investments embedded in 529s are over," said Laura Pavlenko Lutton, the editorial director for Morningstar. "The industry's really improving."

That said, there remain big differences among the plans, particularly when it comes to fees. The most expensive plans (Kansas' adviser-sold version of LearningQuest, New Jersey's Franklin Templeton 529 College Savings Plan and Alaska's John Hancock Freedom 529) cost investors seven times more than the cheapest plans (the Utah Educational Savings Plan and New York's 529 College Savings Program).

Costs matter -- a lot. The more expensive an investment is, the less likely it is to outperform over the long run, Morningstar analysis has shown. In the 529 world, high fees were often coupled with poor performance, as some high-cost program administrators larded their plans with "weak sister" funds that trailed their peers.

Liz Weston

Residents of states that offered tax breaks for 529 contributions once had to hold their noses and invest in bad plans. That's because a state tax break was assumed to be big enough to offset a plan's downsides. That's because the tax break was usually assumed to be big enough to offset the plan's downsides.

Today, everyone has better options available, but you have to know what they are if you want to take advantage. Here's what you need to know.

Start with your tax situation

Whether or not you get a tax incentive helps determine where you should invest:

Most states that tax incomes offer some kind of tax incentive for investing in a 529 plan. (Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming have no state income taxes and therefore no tax break.) The exceptions to the rule are California, Delaware, Hawaii, Kentucky, Massachusetts, Minnesota, New Hampshire, New Jersey and Tennessee, all of which have a state income tax but none of which offer a tax break. (New Hampshire and Tennessee tax only dividend and interest income.) Residents of three states -- Kansas, Missouri and Pennsylvania -- get a tax break if they invest in any state's plan. The other states with tax breaks require residents to stick with their in-state plans. Most states with tax breaks allow residents to deduct their contributions, up to certain limits, from their taxable income. (You can see details of each state's tax break here.) Three states -- Indiana, Utah and Vermont -- offer tax credits, which directly reduce tax bills. Indiana's is the most generous tax benefit by far: Residents get an annual credit worth 20% of the first $5,000 of 529 contributions, which allows them to subtract up to $1,000 from their state tax bills. No reason to stay put? Go for the best

If your state doesn't give you a tax incentive or doesn't require you to invest in your own state's plan to get it, then you might as well invest in one of Morningstar's top-rated plans that are sold directly to investors (rather than through an adviser). These include:

Alaska's T. Rowe Price College Savings Plan and the Maryland College Investment Plan. These are good choices for investors who want active management and are willing to be more aggressive. Both of these T. Rowe plans "are built upon a chassis of well-executed funds," Morningstar says, but it notes that expense ratios are higher and that the aged-based options' asset allocations are heavier on equities than are other direct-sold plans, which rely more on index funds. Ohio's CollegeAdvantage 529 Savings Plan. Morningstar says "there's something for everyone" in a plan that offers managers Vanguard, Pimco, Oppenheimer and General Electric. You can find such variety elsewhere, but this plan distinguishes itself with low fees. Nevada's Vanguard 529 College Savings Plan. This is the go-to plan for those of us who eschew active management in favor of index funds at low, low cost. The plan requires a $3,000 initial contribution; if you don't have that handy, consider Utah's plan.

The Utah Educational Savings Plan. Again, Vanguard index funds, and now with new, lower prices. Plus, there's more control as an investor, if you want it: "The plan's new set-it-once asset-allocation tool allows savers to dictate a mix of investments to change every year as a child nears college," Morningstar notes. "Not every saver needs that extra capability, however, and the plan's other options are solid."

Another plan made Morningstar's list of top programs: Virginia's CollegeAmerica 529 Savings Plan. This fund is sold only through advisers and is the country's largest plan, with nearly $30 billion in assets. I think most investors are better off in direct-sold plans, but if you're using a financial adviser, you'll probably do best in this low-cost plan that "features high-quality investments run by risk-aware, proven investors," according to Morningstar.

Continue reading here:
Best college savings plans

When it comes to taxes, personal and corporate, where does Oregon rank nationally? About middlin' according to a new report by the Tax Foundation, which tracks such matters.

Oregon's "tax freedom day" -- the date by which average wage-earners have made enough to pay their tax bills -- falls on April 8, ranking it 23rd earliest among the 50 states. As for overall state and local tax burden, Oregon falls smack dab in the middle at 25th.

For obvious reasons, Oregon ranks highest on personal income taxes and lowest on sales taxes. It ranks relatively low for corporate taxes. In overall "business climate" rankings, Oregon comes in 13th, according to the report.

The report has a pretty complete breakdown of taxes around the nation, from gas, to cigarette to the usual suspects of income, property and sales. How those statistics end up being used -- well, we'll wait to see.

– Harry Esteve

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Britons living in the eurozone, or with holiday homes or other assets located there, will have watched the continuing saga of the possible collapse of the euro with increasing alarm

Commentators build up the prospect of a country such as Greece exiting the euro, only for headlines the next day to be more positive about the long-term survival of the single currency. The prospect of one of the “Club Med” countries leaving the euro, namely Greece, Portugal, Italy or Spain remains low, but those with assets located in the countries affected are right to have a very real concern for their property and the legal status of contracts which they have entered into, be that employment contracts or rental agreements.

The country which is seen as being the most likely to exit the euro is Greece. The treaties which established the single currency do not contain any mechanism for a country to leave the euro and re-establish its own sovereign currency. As there is no legal basis setting out the procedure for a country to leave the euro, this leaves the door open for speculation as to how an exit would be structured, the consequences for residents in the countries affected and for those owning assets in those countries.

If the Greeks were to re-establish sovereignty over their own currency then it is likely that a conversion day would be set when all euro deposits held with Greek banks and public institutions would be converted to the new drachma, or whatever the new Greek currency is called. This would be done at the official conversion day exchange rate agreed between the Greek government and the European Central Bank. Of course, no one knows what that conversion day exchange rate would be and whether the rate set would reflect the value the international markets are likely to place on the new drachma. Many would speculate that the new drachma is likely to depreciate, at least initially, while the euro itself would rise against the new drachma.

If this pattern of events played out, then it would be beneficial to delay converting euros into new drachmas until after the official conversion day. Those individuals and companies that waited to convert at a later date would potentially receive more drachmas for their money, and would be in charge of their own affairs rather than receiving the agreed official conversion exchange rate. As a result, many Greeks have been moving their money out of Greek banks and depositing their savings in stronger eurozone countries, and indeed to London and offshore banks.

While moving money out of Greece exacerbates the problem and further weakens the Greek banks, it is perfectly rational human behaviour. There is no rule against transferring funds in this way and the governments are powerless to legislate to prevent it; any such rule would contravene EU rules underpinning the single market, which guarantee free movement of capital. So, as a precaution, any euros held with banks in the club med countries should be transferred to stronger euro economies such as Germany, or better still, to euro-designated accounts outside of the EU, for example in Switzerland or the Channel Islands.

If a country exited the euro, there would also likely be major liquidity problems for that country’s banking sector and a run on their banks. If the Greek government was to announce its exit from the euro, there would be uncertainty and widespread panic among the Greek public; they would be desperate to withdraw their euros while they still could. As a result, it could become extremely difficult to access and withdraw funds held by those banks. The failure of the banks affected would become a real possibility. Investors’ protection would be limited to €100,000 for each depositer under the EU financial compensation scheme and the procedure for being repaid under that scheme is lengthy. For all these reasons it is again sensible to move money from banks and countries likely to be affected as soon as possible.

Where property is rented out either on a long-term basis or as short-term holiday lets, the rental agreements could be affected by any change in the currency where the property is located. For example, as part of the exit mechanism, any payments in contracts could be converted to the new drachma at the conversion day exchange rate. It would be advisable for such contracts to contain clauses setting out what is to happen in the event of a break-up of the euro. It should also be possible to provide in contracts that notwithstanding any other legislation or operation of law, the rent is still to be paid in euros.

Where staff are employed or services received in countries likely to be affected, a switch to a new currency could result in savings on the housekeeping or gardening bills for property owners. Any contracts for services should reflect that, following an exit from the euro, payments will be made in the new currency. Alternatively, such contracts could be drafted to terminate on an exit from the euro, with payment clauses being re-negotiated when the new currency details and value were known. Care would need to be taken with employment rights so as not to trigger any claims for dismissal in such circumstances.

While those with assets in the Club Med (Paris: FR0000121568 - news) countries are right to be concerned, the devaluation in asset prices will also bring opportunities. It should become possible to acquire holiday homes or additional land at lower prices. Those already holding assets should consider inheritance planning while asset prices are depressed.

If the headlines change again tomorrow and the euro crisis passes, taking preventative action will have been in vain. But complacency in such situations is rarely rewarded, and given the dramatic changes which would follow a break-up of the euro, taking precautions before it is too late is a pragmatic course of action.

Donald Simpson is a partner at Turcan Connell , lawyers, tax specialists and wealth managers

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