529 College Plans

One of the most gratifying things we can do with our money is invest in future generations. A great way to do this is through 529 College Savings accounts. This can be a way to leverage the benefits of income-tax-free growth, while making sure that education remains a priority for future generations. Anyone can open a 529, regardless of income.

Contributions to 529 accounts are also a way for grandparents to keep control of the money AND move the money out of their estates. You can transfer significant amounts to others and get the assets out of your estate, up to $19,000 each year ($38,000 for married couples) per beneficiary each year without gift-tax consequences. There is even a special rule for 529 accounts that lets you transfer up to five years of gifts ($95,000 for an individual or $190,000 for a married couple) and, for the tax purposes, spread the gift over the next five years.

529 accounts are flexible

If your oldest grandchild receives a full scholarship to college, congratulations! You can change the beneficiary of the 529 at any time to any of your other grandchildren, or your grandchild can use the money for graduate school or for their own child. These accounts can pay for any US college, trade school or community college. They can pay for tuition, room and board, computers, and books. The funds cannot be used for travel or cars.

Take advantage of tax breaks

The biggest tax benefit of 529 plans goes to the student. Earnings on 529 investments are free from federal and state taxes if they are used for qualified educational expenses. There are no age limits for the recipients and the money can be held in plans indefinitely (if the plan allows this). If your circumstances change and you need the money for other purposes, you can take it out of the 529 account. Keep in mind you will have to pay income taxes on the growth. You'd also pay a 10% penalty on the earnings but not the contributions.

If you'd like to learn more about this, please reach out to us!

Sincerely,

Cass, Bleckley and Megan