04/26/2018










529 Plans and Estate Plans

Long Island 529 Plan Attorney - Lamkin Elder Law

A 529 college savings plan is the ideal way to help fund your child’s future college expenses. What you may not know about a 529 plan is that it is also a valuable estate planning tool. For individuals of wealth, a 529 college savings plan provides an opportunity to help transfer some of that wealth as part of the overall estate plan.

The Rules of 529 College Savings Plans

All 50 states allow the use of a 529 college savings plan. Also referred to as qualified tuition programs, these investment opportunities offering parents numerous tax benefits are overseen by the state’s treasury department. One of the best features of a 529 plan is that you do not have to live in the same state where the plan is established. Additionally, you do not have to send your child to a college in the state where the 529 plan is set up.

Because of this open-ended option, states are now competing with one another – which means they are offering generous contribution limits to parents. These types of plans are a simpler form of investment with minimal risk too, making them ideal for every estate plan.

Using a 529 Plan in Your Estate Plan

From an estate planning perspective, there are several attractive features to a 529 college savings plan. Unlike their competition, the education IRA, you are not restricted by income limits nor are you prohibited from fully contributing to the plan. That means that everyone will qualify to own a 529 college savings plan regardless of how much they make each year.

529 Plans and Tax-Free Gifting

One of the most attractive features of 529 plans is that they allow you to reduce your estate tax obligations with an annual tax-free gift contribution of $13,000. Married couples can contribute as much as $26,000 per year in tax-free gift contributions for each beneficiary (each child) without any federal gift tax issues arising later on.

For individuals that wish to reduce the size of their estate, they can fund 529 plans for their children and reduce the tax burden on the estate as well as their beneficiaries. Each contribution can help reduce the size of a wealthier individual’s estate dramatically and minimize or even eliminate tax obligations altogether.

Grandparent Gifts

529 plans are not exclusively offered to parents. Grandparents that wish to contribute to a child’s education can use a 529 account as well. However, grandparents must keep in mind the federal generation-skipping transfer tax or GSTT. This tax is applied to individuals that are one generation below the gift-giver, such as a grandchild. There is a GSTT exemption and GSTT is not due until that exemption has been exceeded. Grandparents can contribute a maximum amount per year to a grandchild’s 529 plan to reduce their own estate value and still keep their grandchildren free of federal taxes later on.

Speak with the Law Office of Andrew M. Lamkin, P.C. Regarding Your 529 Plan

If you are interested in using a 529 college savings plan as part of your overall estate plan, contact attorney Andrew M. Lamkin, P.C. today for a free consultation. We can discuss your options and help find the best method for reducing your estate tax obligations. Contact us online or call 516-605-0625 to get started.



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