Next Generation Series: 529 Plan

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This is our next blog in a series about setting up the next generation for success. In this piece, we outline the benefits of a 529 Plan

A 529 plan is a tax-advantaged plan created to save money for college tuition, housing, books and other education-related expenses at most universities. In addition to traditional college tuition and fees, funds can be used at a number of vocational and trade schools. Also in some states, 529 savings now may be used towards tuition expenses at eligible private elementary and secondary schools (K-12). 529 plans must be established for one individual beneficiary. All contributions grow tax-free and as long as withdrawals are used for qualified expenses, they are not subject to federal income tax. In addition, most states offer their own 529 plans with their own investment options, fees and state income tax benefits.

All contributions to the 529 plan are removed from the donor’s gross estate but are considered gifts to the beneficiary. You can use your annual gift tax exclusion of $15,000 per donor, or $30,000 per married couple, without the money being subject to the federal gift tax. Contributions up to $75,000, or $150,000 per married couple, can also be front-loaded in a single year as if it were spread over a 5-year period without incurring any gift tax liability. This can allow earnings to compound on more money over a longer period of time.

If a beneficiary doesn’t use all the assets, you can reassign the plan to other family members.

Feel free to contact us to discuss your planning needs.


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