Many parents use 529 savings plans as a way to let their child’s college funds grow tax-free. Did you know, however, that 529 plans are not just for parents and children? They are also not limited to use for tuition. Parents, grandparents, and other adults with children, grandchildren, nieces or nephews can use a 529 savings plan not only to fund college tuition, but to ensure that a myriad of other expenses are covered for their loved ones, now and in the future, by making a 529 savings plan part of their estate plan.
Unlike other tuition savings programs, money put into a 529 savings plan can be used not only for tuition, but also for room and board costs, books, special supplies and equipment for different types of higher education (like art supplies for a design student), computers and other electronic devices, and even Internet access. If you have a child or grandchild with special needs, money from a 529 plan can be used for any expenses specific to their needs as well. Funds from this type of plan can also be used for graduate level education, like law school or medical school.
Using a 529 plan as an estate planning tool can truly broaden the scope of your savings. You can use the money in a 529 savings plan to pay expenses for your child or grandchild. You do not, however, have to spend it all at once. You can cover the expenses of loved ones who need it during your lifetime and leave the rest in the savings plan to be passed on after your death, to be inherited by the beneficiary of your choice.
This means that your grandchild could benefit from funds in the plan right now, and many decades down the road they can use funds that were left in the plan to pay their own grandchild’s higher education expenses. In this way, using a 529 savings plan can be an exceptional estate planning tool as it allows you to pay for the higher education expenses of your descendants, generations into the future.
To learn more about how you can use your plan as an estate planning tool, please contact our office to schedule a time to meet.