When considering a 529 plan, the first thing you need to know is that these plans come in two flavors: "prepaid college tuition plans" and "college savings plans." We'll admit, we're pretty partial to the latter (for reasons you'll understand as you read through this package). But a perk of both plan types is that they are open to anyone, regardless of income -- unlike, say, a Coverdell Education Savings Account (CESA), which excludes joint filers with adjusted gross incomes (AGIs) above $220,000 and single filers with AGIs above $110,000 like Alabama's Higher Education 529 Plan allow a maximum contribution of $300,000 that can then grow tax-free. Beneficiaries can be changed without income-tax consequences to family members of original beneficiary, including cousins.

But before you plunk down your cool quarter-mil, there are still tax issues to consider. For starters, while future withdrawals will be federally tax free, you might owe gift tax if you contribute more than $14,000 annually. That's because anything you contribute over that amount reduces your $5.5 million lifetime federal gift exemption. Keep in mind, however, that both you and your spouse can each make $14,000 contributions in a given year. In fact, if you've got the cash on hand, you could even make five years' worth of contributions upfront, provided that you don't make any other cash gifts to that beneficiary over the next five years, explains CPA Tom Ochsenschlager, a partner at Grant Thornton. That means you and your spouse could join forces to contribute up to $140,000 in one fell swoop without negative gift-tax consequences (5 x $14,000 x 2 = $140,000). Grandparents can get in on the act too, which can be especially strategic if they're looking to reduce their estate-tax liability.

Finally, unlike UGMA and UTMA (custodial accounts set up for minors), 529 plan contributions are not irrevocable, explains Craig Bramhall, regional vice president of investment products at American Express, which is affiliated with Wisconsin's college savings plan. In other words, should Junior decide to become a circus acrobat rather than go to college, with a 529 plan you can simply change beneficiaries to someone else in your family. With an UGMA or UTMA, on the other hand, once Junior is legally viewed as an adult by your state, he could take the money and start his own circus.

Finding the Right Plan
The first step in finding the right plan is to decide between a prepaid and college savings plan. We lean strongly toward college savings plans, which offer you much more flexibility -- both in terms of investments and how you spend your money.

The next step is careful research, but fortunately, you have an excellent crib sheet. Joe Hurley's Web site, Saving for College will give you the lowdown on each state's plan, including maximum contributions, eligibility requirements, performance information and contact information. It's an invaluable resource for finding what you need.

Here are some other things to consider:

Do You Want a Financial Adviser? Just like in the mutual-fund world, you have two routes to choose from when considering 529 plans. You can either go it alone or pay a commission to an adviser. With solid no-commission programs offered by fund families like T. Rowe Price (which works with Alaska) and Fidelity (which works with Delaware, New Hampshire and Massachusetts), selecting a plan on your own might not be too hard. Like a mutual fund, should you go the broker/financial adviser route, you'll have a few ways to spread out the costs. For example, you may be able to pay, say, a 3.5% commission upfront or when you cash in your shares.

How Good Are the Investments? This is perhaps the most important decision since no matter what plan you pick, your choices are going to be very limited. Many plans gear investment choices based on the age of your child, but that doesn't mean that they will match your tolerance for risk. Some plans may be too aggressive or too conservative for you. So be sure to look at the fund's historical returns and volatility.

How Flexible Is the Plan? Before you sign up, make sure you understand all the ins and outs of the plan. Find out if there are time limits on when the account must be used. Also, know how much you can contribute to the plan and check to see what expenses the account can cover.

Review the Fees. Be sure to check the enrollment fee as well as any annual fees. Obviously, the more you pay in fees, the less you'll have in your college stash.

Read on to for the more on 529 college savings plans.