Funding Your 529 Accounts Estate Tax Rachel held her newborn granddaughter, Sophia, and dreamed of her future. She saw her celebrating all the “firsts” – first birthday, first day of school, first date. Rachel smiled as she imagined Sophia proudly accepting her diploma from the college of her choice. Her smile faded as she next saw Sophia buried under a mountain of school loans. Luckily for Sophia, her grandmother knew several ways to save for a college education, including funding a 529 account. A Plan for the Future. It’s been described as a “tax-advantaged savings plan designed to encourage saving for future college costs.” Also known as a “qualified tuition plan,” the 529 plan is authorized by Section 529 of the Internal Revenue Code, but may be administered by state agencies or even educational institutions. Money can be withdrawn tax-free to be used for qualifying higher-education-related expenses. By the way, investors are not limited to the state in which they live or in which a favorite college is located. Someone living in Virginia could set up a Florida 529 because the terms are most favorable, and then pay for college expenses incurred in Alaska. Under the new tax law, up to $10,000 of 529 funds can be withdrawn to pay for K-12 educational expenses. Growing a 529. First the account holder will choose a 529 plan that fits their needs, has the best returns, and charges the lowest fees. While only one person can own a 529 account, multiple people can contribute to it. Each 529 plan has only one beneficiary, but account holders may open multiple 529s. For example, an account holder with three children would open one account per child. Florida’s 529 annual contribution limit equals the IRS annual gift tax exclusion. The maximum account balance (money contributed) is $418,000. However, the account balance may exceed $418,000 because of investment earnings. Most 529 plans will be managed by a financial company, based on factors like your goals, your age, and your child or grandchild’s age. 529 Plans Can Be Complicated. A 529 College Savings Account could benefit your children or grandchildren, in addition to providing tax benefits for you. Still, there are rules and regulations to follow in order to get the best benefit. Talk to an estate planning attorney about your 529 plans and any tax-reducing estate planning strategies available to you. At Law Offices of John Mangan, P.A., we’ve helped many clients develop their estate plans. We can set up an appointment for you if you just call 772-324-9050 or use our convenient Contact Form. Though located in Palm City the Law Offices of John Mangan, P.A., serves clients in Stuart, Palm City, Hobe Sound, Jupiter, and Port St. Lucie
