While many think of 529 savings plans as a way for parents to enjoy tax free growth of savings for a child’s college tuition, the benefits of these savings plans can have a much farther reach. Did you know that 529 savings plans can be established by not just the parents of a child, but the grandparents, aunts, uncles, and other loved ones as well? The flexibility of 529 savings plans, as well as the potential tax advantages, means that these plans can be beneficial to your estate plan.
The 529 savings plan can cover a broad scope. In fact, pretty much any person pursuing almost any kind of education in the United States can benefit from money put into a 529 savings plan for his or her benefit. Funds can be used for tuition, room and board, books, special supplies and equipment for different types of higher education (like a stethoscope for a medical student), computers and other electronic devices, and even Internet access. In theory, money placed into a 529 plan prior to your passing away could cover all kinds of expenses for your grandchild’s education from kindergarten through medical school.
If your child or grandchild is disabled and unable to pursue education at an institution that qualifies for 529 savings plan payments, money from the account can be rolled over without a tax penalty into an ABLE account. An ABLE account can pay for many types of disability related expenses, including education, shelter, transportation, employment training, medical and other health costs, legal fees and financial advisor fees, and expenses specific to the kind of monitoring and living assistance often necessitated by disability.
You may be concerned that if your child or grandchild decides not to pursue further education, the money left in a 529 savings plan will go to waste. That, however, is not necessarily the case. You do not need to empty the account during your lifetime. You can leave it to your heirs, and they can use it for their own children and grandchildren.
To learn more, get in touch with our office to schedule an appointment.