And what happens when Junior withdraws $15,000 or $25,000 or even $50,000 from his taxable accounts in the course of one year, to pay the first year of tuition and other educational expenses? Simply put, he'll be taxed in a higher bracket that year and every subsequent year he makes a significant withdrawal.

Contrast that tax scenario with a 529 plan, in which investors can routinely change investments, move from plan to plan within a state program and transfer entire balances to a new state plan every 12 months without incurring any tax. (Some plans have instituted one-time withdrawal penalties ranging from $25 to $35 to staunch investment flows.)

Another tax benefit with many 529 plans? Investors in 25 states can take an annual state income tax deduction for contributions. In some states, that deduction is limited by the plan's maximum contribution cap, which typically ranges from $225,000 to $305,000, Hurley says. These write-offs can be especially meaningful for parents and grandparents in higher tax brackets who can use the deductions.

To encourage more education savings and fatter state plan coffers, a growing number of states also are offering matching contributions to state residents.

A downside to taxable accounts is that when they are put in kids' names, parents must relinquish control over how the money is used. In contrast, "529s are a big bonus for high-income people, and the money doesn't automatically go to kids when they reach college age," says Bill Driscoll, president of Driscoll Financial in Plymouth, Mass. "The plans are also really, really important tools for middle-income investors who are going to be just over the income limits for financial aid."

The long-time planner brings up two important benefits to the 529 plan. First, unlike taxable accounts or even Coverdell or UGMA or UTMA accounts, the money remains in the account holder's control-namely the child's parents or grandparents. If a child decides not to go to college, the household can transfer the account to another family member should he or she want to go to school.

Another benefit of 529 plans is the less onerous impact they have when it comes to calculating a child's financial aid eligibility. Unlike taxable accounts (or for that matter any accounts that are put in the child's name), 529s are counted for financial aid purposes as the parents' assets. In contrast, because children are the legal owners of the Coverdell and other accounts, they are assessed at a higher rate when applying for financial aid.

Driscoll says all these benefits have focused more, not less, attention on 529 plans. He has several clients with students approaching college aid who have decided to take out home equity loans to fund stable-value or fixed-income accounts in 529 plans. While Driscoll says he didn't recommend the move, he can admire the beauty in it. "They're saying, 'This is an expense we have to fund one way or another. Why not be as smart about it as possible?' This allows them to tap a small part of what has been a huge run-up in home equity at historically low rates. They get a tax write-off in the process, which they can use because they're in the highest tax brackets," Driscoll says.

For younger, less wealthy clients, especially those who often opt to fund college savings over their own retirement, Driscoll has found a tradeoff that seems to work: He has them fund Roth IRAs first. They'll be able to tap all contributions for college costs if they need to, while at the same time socking money away for retirement. "My goal is that when they start to see the Roth account grow, they'll want to start the 529 and not tap their retirement assets," Driscoll adds.

Finding the best 529 options, whether in state if there is sufficient benefit from a state tax deduction or out of state if there is no such tax benefit, is also getting easier with the advent of two new comparison and rating tools for advisors. Both Hurley and Morningstar have introduced new programs advisors can use to sort plans and find the ones with the best performance and lowest expenses. Hurley's program is called 529 Pro Solutions (www.savingforcollege.com) and Morningstar's is called the Morningstar 529 Advisor (www.MorningstarAdvisor.com). Both have annual subscriptions of $395.