National Estate Planning Awareness Week - October 16-22, 2023 - is dedicated to educating the public on the pivotal role of estate planning in securing financial well-being. Recent findings, as highlighted in a Brookings article, discuss the significant impact of inflation on everyday expenses, including the soaring costs of higher education. Despite a temporary respite of rising tuition costs during the pandemic, which included reduced tuition or frozen tuition hikes, institutions now grapple with revenue shortfalls in the face of the ongoing inflation, leading to cutbacks in critical resources like financial aid. Considering the financial uncertainty facing many families, incorporating 529 education savings plans into estate planning strategies can provide a means to navigate these financial challenges, while helping to secure future education and ultimately career opportunities for loved ones.
A 529 education savings plan, like the one offered through The Education Plan®—New Mexico’s’ 529 plan—offers tax advantages including tax-free growth, and tax-free withdrawals for qualified education expenses. In some states, contributions are also tax-deductible on state income tax returns. With a wide range of investment options, high contribution limits, and coverage for a variety of educational expenses, 529 plans can be a great option no matter the income level.
Additionally, a 529 savings plan through The Education Plan® can enhance estate planning, while empowering future generations. Contributions to a 529 account for a beneficiary are considered gifts for tax purposes. The federal annual gift tax exclusion allows for $17,000 for a single individual and $34,000 for married couples. For 529 plans, contributions of up to $85,000 for a single contributor (or $170,000 for married couples) can be made in a single year and applied against the annual gift tax exclusion equally over a five-year period.
“Families are often impacted by the burden of future education expenses and the substantial cost of college, so it becomes increasingly vital for families to take proactive steps in securing their financial future,” said Natalie Cordova, Executive Director of the Education Trust Board of New Mexico, the organization that administers The Education Plan®. “When planning your estate, consider looking ahead to future generations and contribute to a tax-advantaged 529 plan.”
529 plans can be used for a wide range of qualified expenses including tuition, books, room and board, meal plans, computers and software, educational special needs services, K-12 tuition (up to $10,000 per year), apprenticeship expenses, and even student loan repayment (up to $10,000). Moreover, The Education Plan® equips families with essential tools and resources such as a glossary of terms, tax benefit information, a detailed FAQ, and a help center , enabling them to navigate education financing and make more informed decisions to help secure a successful future for themselves and their families.
“529 plans offer flexibility and a simplified way to save for education expenses,” added Cordova. “With the benefits of contributing, families can take control of their financial future, while providing their loved ones with access to educational opportunities and future career opportunities."
For more information on The Education Plan® or to set up a 529 account, visit www.TheEducationPlan.com.