529 Plans Offer a Tax-Efficient Way to Transfer Wealth

Funding a 529 account may be an attractive option for individuals with taxable estates who want to help their child, grandchild, or other loved one save for college.

You can fund a 529 plan account for you loved one with up to $80,000 ($160,000 for married couples) in a single year without your gift being subject to the federal gift tax and without using any of your lifetime exclusion for federal gift and estate taxes. That's five times the annual gift tax exclusion amount for 2022 — and five times more than you can contribute to any other type of account without triggering the federal gift tax.

A special tax provision that applies only 529 plans allows contributions between $16,000 and $80,000 (2022 amounts) to be treated for federal gift tax purposes as if they were made in equal portions over five years. This enables you to apply the annual exclusion ($16,000 in 2022) to a portion of your contribution in each of the five years.

Please note: if you do not outlive the five-year period, part of your gift will be added to your estate for estate tax purposes.

See also:  Five Ways to Pay for College by Breanna Sykes, Copper Leaf Financial Wealth Advisor

With offices in Rutland and Williston, Vermont Copper Leaf Financial develops a customized wealth management plan designed to integrate every aspect of your financial life. Call us today at 802-878-2731 to schedule a strategy session and begin building your road map to financial success.

This article was published in the September/October 2022 issue of Eye on Money. If you would like to be added to our mail list please email jennifer@dh-cpa.com.