You may know them as 529 plans, Qualified Tuition Programs, or QTPs. Whatever you call them, what they amount to is a way for you to help a son, daughter or grandchild pay for college.

In short, 529 plans are investment tools designed to help families pay for future expenses associated with college or other qualified post-secondary training for a designated beneficiary, such as a child or grandchild. The fund can be used to help pay for such expenses as tuition, books, supplies, fees, and computer equipment.

The plans are broadly known as 529 plans because they are named after Section 529 of the Internal Revenue code. Before we dive into the tax benefits of 529s, let's be clear on what they are-- and what they are not.

As indicated, a 529 plan is an investment tool in which funds are set aside in an account operated by a state or educational institution. They are not, however, deductible on your federal return (although some states offer a partial deduction on the state returns).

Nevertheless, there are several benefits to contributing to such plans. Here are 5:

1) Who: The biggest benefit is to you and the person you designate as beneficiary. When you establish a 529 account, the earnings generated in the plan are not subject to federal tax and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary. Your child, for example, as the designated beneficiary, gets the peace of knowing a fund for college expenses awaits, and the fund also provides an incentive to pursue education beyond high school.

2) What: There are two types of 529 plans: prepaid and savings plans. They also differ by state so make sure to check with your administrator for the rules that apply to you. Generally, here's how it works. Prepaid plans are offered in about a dozen states and allow participants to purchase tuition credits to be used in the future. Savings plans are different in that a fixed amount is contributed monthly and growth is based on market performance. This type of 529 plan consists mostly of mutual funds. But unlike capital gains paid on mutual funds or other savings plans upon withdrawal, no tax is due on the distribution of a 529 plan unless the amount taken out is greater than the beneficiary's qualified education expenses. Also, the part of a distribution that represents the amount paid or contributed to a 529 doesn't have to be included in income. This is a return of the investment in the plan.

3) Why: Setting up a 529 plan is an investment decision, which means both the benefits and drawbacks must be considered. The biggest drawback, of course, is that contributions to the fund are not tax-deductible on federal returns. However, more than half the states allow you to deduct some or all of your contributions from your state income at tax time. Contribution limits are set at the state level. On the federal level, you can currently contribute up to $14,000 to a 529 plan without incurring federal gift tax consequences.

4) When: Ideally, the best time to set up a 529 plan is when your designated beneficiary is still a baby or young child. Like other types of savings accounts,  growth is usually a function of time. So the longer you have to build up the fund, the more money will be available to offset the youngster's educational expenses-- and the more your earnings will grow. But the fact of the matter is, you can start a 529 plan anytime and begin enjoying the tax benefits. There are no income limits or age limits. You remain in control of the account until you're ready to withdraw funds. When the college bills start coming, all funds from your 529 plan will be distributed tax-free if they are going to be used to cover qualified expenses.

5) Where: Looking for more information about 529 plans? Greater detail about them can be found in IRS Publication 970, Tax Benefits for Education.

Each family must balance its own pros and cons, but overall, the tax benefits of 529 plans might outweigh the cons. A tax pro can help you decide if this makes sense for you. The beauty of most 529 plans is their single-focus simplicity and flexibility. Besides lump sum contributions, in most cases you can set up a fund using payroll deduction or an automatic deduction from your checking account. You can change your 529 plan investment options twice a year, and you can also change, without penalty, your designated beneficiary to another family member.

Got a kid in your family who you'd like to send to college one day? Then a 529 plan might make sense. The National Association of State Treasurers created the College Savings Plan Network, which provides links to most 529 plan websites.

So as many kids head back to school today, it's a good reminder that it's never too early to start planning for their futures.