Estate Planning and 529 Plans

When you contribute to a 529 plan, you'll not only help your child, grandchild, or other loved one pay for school, but you'll also remove money from your taxable estate. This will help you minimize your tax liability and preserve more of your estate for your loved ones after you die. So, if you're thinking about contributing money to a 529 plan, it pays to understand the gift and estate tax rules.

Overview of gift and estate tax rules

If you give away money or property during your life, you may be subject to federal gift tax (these transfers may also be subject to tax at the state level).

Federal gift tax generally applies if you give someone more than the annual gift tax exclusion amount, currently $15,000, during the tax year. (There are several exceptions, though, including gifts you make to your spouse.) That means you can give up to $15,000 each year, to as many individuals as you like, federal gift tax free.

In addition, you're allowed an "applicable exclusion amount" that effectively exempts around $11,400,000 in 2019 for total lifetime gifts and bequests made at death.

Note: State tax treatment may differ from federal tax treatment, so look to the laws of your state to find out how your state will treat a 529 plan gift.

Complete Article


How Can We Help You?

Name *
Name
Phone
Phone