Most people think of a 529 Savings Plan as a college savings program, but did you know that it can be used for much more? The funds can be used for college tuition, room and board, qualifying education expenses such as books and computers, and even certain elementary school, high school, and graduate school expenses.
A lesser known fact about 529 Plans is that they are also excellent estate planning tools. The beneficiaries of 529 Plans can be changed and the money can remain in the account so that the funds can be passed through generations. If, for example, a beneficiary decides he or she does not have a need for the funds or does not use up the entire balance of the 529 account, the plan beneficiary can be changed to another person.
Another estate planning benefit can be that the money contributed to a 529 plan is immediately removed from the donor’s estate and is, therefore, not subject to the gift tax as long as the amount contributed falls below the annual gift tax exclusion, which is currently up to $15,000 for an individual and $30,000 for a couple, per recipient per year. Contributors to a 529 Plan are also afforded the unique benefit to frontload 5 years’ worth of gifts to a single beneficiary in one year and still remain exempt from the gift tax. That means an individual can contribute up to $75,000 and a couple can contribute up to $150,000 to a beneficiary’s 529 Plan in one year without tax, as long as the same beneficiary is not gifted any more funds from the contributor for five more years.
Finally, the 529 Plan provides a benefit not found in many other estate planning vehicles. This benefit is control. The contributor to the 529 Plan retains the ability to control the funds and the account, while simultaneously deducting that money from his or her estate.
To learn more about 529 savings plans and how they may benefit your estate-planning needs, please reach out to our office to schedule an appointment. We do telephone, computer, and face-to-face appointments. Our face-to-face appointments are held outside in the open air (frequently selected by clients for document signing) and inside our office conference room. We follow all CDC guidelines. Our office procedures and COVID-19 safety protocols are designed and enhanced by medical review and air quality engineering and design.