Give the Gift of a Lifetime: Contribute to a 529 Plan
What can be a more lasting and practical gift than helping your child, grandchild, niece or nephew, or someone else you care about fund his or her college education and meet a lifelong dream?
High college costs are an obstacle many parents and children face. That's why some relatives and family friends choose to gift to a child's 529 college savings plan for birthdays and holidays. Not only does 529 gifting help the child save for college, but it also reinforces the importance of getting a college education.
If you're concerned about reducing estate taxes and transferring your wealth to your heirs, you may want to include gifting to 529 college savings plans in your estate planning strategy.
As with any gifting program, you can gift as much as $12,000 annually to a child's 529 plan without incurring gift taxes ($24,000 for a married couple), which removes those assets from your estate. But a special tax provision actually lets you gift a higher amount to a 529 college savings plan at one time.
Currently you can gift a lump sum of $60,000 ($120,000 for joint filers) to a beneficiary's 529 plan free from gift tax, which counts toward five years' worth of annual exclusion gifts. This lump sum gift lets the child take advantage of the potential growth of the 529 plan investments.
Note: If you gift a lump sum of five years' worth of gifts, you can't make any other gifts to the beneficiary for a five-year period without incurring gift taxes. And if you die within five years of the date of the gift, a portion of the gift may be subject to estate taxes. Consult your tax advisor for more details about using 529 gifting as part of your estate planning strategy.
Your Financial Advisor can give you more information about the tax benefits of 529 plans and how they work as well as help you establish one for a child.
You should consider a 529 plan's investment objectives, risks, charges and expenses carefully before investing. Read the plan's official statement, which contains this and other important information, carefully before investing.Note: An investment in a 529 plan will fluctuate such that an investor's shares when redeemed may be worth more or less than the original investment. There is no guarantee that a 529 plan will grow enough to cover higher education expenses. All 529 plans have various fees and expenses. Before investing in a 529 plan, be sure to read the plan's offering document carefully for more information on fees, charges and expenses. Non-college-related withdrawals are subject to income taxes and an additional 10% IRS penalty on earnings.
