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Post Christmas - Make a 529 Plan Gift a New Holiday Tradition


Post Christmas- Make a 529 Plan Gift a New Holiday Tradition

It’s great fun to buy toys for children and grandchildren and to watch their eyes go wide with excitement. But years later, when those toys are long forgotten, the children and their parents will be thrilled to learn that their college costs will be less because you gave an annual gift to their 529 college savings plan. If you can’t stand not giving a present, buy a less expensive gift, and use the balance of what you would have otherwise spent for an annual 529 gift.

CBS MoneyWatch’s recent article, “5 reasons to gift a college saving plan contribution,” lays out five good reasons for investing in a 529 plan this holiday season:

Taxes. 529 plans have some nice tax benefits. While the contributions are after-tax, the earnings within a plan are tax-free. Some states also give residents a write-off for contributing. There are 33 states and DC that offer a state tax break, but remember that you’ll be taxed if you use withdrawals for non-college expenses.

Financial Aid. The assets in 529 plans won’t significantly impact a student’s financial aid prospects, because the funds are in the parents’ names. When a school calculates a student’s Expected Family Contribution (EFC), there is a maximum of 5.64% of parental assets that are counted—much lower than other student assets, which are counted at 20%. A higher EFC means less financial aid.

Tuition Discounts. Target colleges to get tuition discounts, such as prepaid plans that let you lock in today’s tuition rates.

Estate Planning. These contributions are helpful in estate planning. Grandparents should note that your contribution qualifies for the $14,000 annual gift tax exclusion, which lets most people make larger contributions without a gift tax.

No Limits. Don’t worry about contribution or age limits. The contribution limits vary by state and range up to $500,000. There are no age limits on who can contribute.

In addition, all plans offer “age-based” or “risk-adjusted” portfolios, which means that professional managers select mutual funds for you and reduce stock- and bond-market risk as the child ages. You can also go to graduate school even if you have no children with a 529 plan. As long as the money is used for college-related expenses, there’s no tax.

When shopping for a 529 plan, keep in mind that the lowest-cost plans are “direct-sold” programs. They don’t charge a commission and have lower expenses than adviser-sold plans.

It may take a few years of asking family members, but eventually they’ll understand why this makes sense. Ask grandparents and other relatives to also make contributions to a 529 in lieu of birthday gifts. Your future holidays will be brighter with well-funded college savings accounts.

Do you have Grandchildren or Children and live in Miami-Dade, Broward, or Palm Beach counties in Florida? Laws are constantly changing-- has your estate plan been reviewed in the last 2-3 years? Call me (954-888-1747) right away for peace of mind. I can help!

  • My practice is exclusively estate planning and probate,
  • I have prepared numerous estate plans in 16 years of practice,
  • I have administered estates and trusts through Probate all over Florida,
  • I am a Certified Financial Planner Professional™, and
  • I am here for YOU today and there for your FAMILY tomorrow.

Reference: CBS MoneyWatch (November 28, 2016) “5 reasons to gift a college saving plan contribution”

Why would we recommend D.T.F.? Several Reasons: Your ability to explain complex estate problems, clearly and patiently; your total lack of arrogance and pretense; a strong feeling that you are motivated by what you perceive is best for your client, rather than what would generate the largest legal fees; finally, and importantly, you are a lovely guy. A.C.

Two words cannot sum up the entire process of creating my “trust.” I enjoyed your attention to detail, your patience of explaining terms and conditions until I understood, also giving me copies to read and understand. Thank you for your suggestions on what was best for “me” but still allowing me to make my choice. Most of all, thank you for thinking of “me.” Wells Fargo said “you were the best” I cannot deny that. Again thank you very much for everything. Anna is an asset or a compliment to the firm. She is warm and very caring. It was great doing business. Thank you.