529 Savings Plans Have Estate Planning Benefits

Thanks to the changes to tax law made under the 2017 Tax Cuts and Jobs Act, there are now opportunities to use 529 college savings plans as estate planning tools, while also allowing you to still use them to pay for more education-related expenses than you may have been able to in the past.

Leveraging 529 savings plans in your estate plan

Under the new law, a person who has been contributing to a 529 college savings plan is allowed to front load five years’ worth of contributions (a maximum of $75,000) into a single year, without any gift taxes being incurred. This means if two parents or grandparents want to support a child’s college education, they can put up to $150,000 in a 529 plan in a single year ($75,000 each) without incurring federal gift taxes. This tax-free gift also then reduces their estate tax liability.

The Tax Cuts and Jobs Act also allows the withdrawal of up to $10,000 per year to pay for K-12 education at any type of institution, public or private. Up to $15,000 per year can also be rolled into an Achieving a Better Life Experience Account, a vehicle for savings for people with disabilities.

These are just two of the changes that are noteworthy because of the 2017 tax law changes, but there is also the opportunity for using a 529 account to fund student technology purchases, or for adult account holders to use them to pay for their own retraining or education.

For more information about how you can make creative use of a 529 college savings plan in your estate planning, contact an experienced Tampa estate planning attorney at BaumannKangas Estate Law.