Merrill Lynch of New York will introduce a gift tax-free family of funds designed for college saving investors, the company announced last week.

The new funds are funds of funds and part of the company's "529" plan which refers to the tax code that exempts investments made on a beneficiary's behalf from gift taxes.

Investments made on behalf of a beneficiary are tax-free as long as the amount of the investment does not exceed $50,000 within a five-year period. The fund must be redeemed for secondary education purposes only and redeemed assets are taxed at the beneficiary's tax bracket.

A minimum investment of $250 is required and investors can make a monthly minimum contribution of $50, according to the company.

The new fund family will be made up of four funds including an all-equity fund, a balanced fund with 75 percent equity investments, a fixed-income fund and a fund that is tailored to the age of the beneficiary, according to a statement issued by the company.

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