5 Benefits for Including a 529 Account in Your Estate Plan


5 Benefits for Including a 529 Account in Your Estate Plan


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Merriam-Webster defines estate planning as the “arranging for the disposition and management of one's estate at death through the use of wills, trusts, insurance policies, and other devices.”

For savvy planners, a 529 education savings plan can be one of those “other devices” used as an effective tool for protecting your assets while providing support for the educational future of your children or grandchildren. While many aspects of estate planning can get complicated, establishing a 529 plan to save for the future education expenses of your children, grandchildren, or other loved ones is a simple process.

A 529 account is a flexible, tax-advantaged addition to a well-rounded estate plan. They’re easy to open, manage, and adjust as your plans—and your family’s needs—change.

529s and Estate Planning—Five Things to Know

  1. The sooner, the better. While it might seem that we can wait until later in life, the best time to plan how our assets will be passed on to the people we care about most is now. When it comes to future education expenses of your children and grandchildren, it’s never too early to start investing. Investing early for a child or grandchild’s future education gives your investment more time to grow, no matter the size of your contribution. As with retirement accounts like 401(k)s or IRAs, these deductions can be made monthly, or more or less frequently, as payroll or bank account deductions. You earn interest on the original investment as well as the interest earned over time. Visit the College Savings Tools & Calculators page of the Saving for College website to better understand the advantages of starting an account early and the power of compounding interest.
  2. Tax benefits. 529 plan accounts are tax-advantaged, which means the earnings on your initial investment are not subject to federal income taxes, as long as they are used for qualified education expenses. Many states also offer additional tax incentives. If you are a resident of New Mexico, for example, 100 percent of your contributions to The Education Plan, New Mexico’s official 529 plan, are deductible from your New Mexico state taxable income each year if the funds are used for qualified expenses.
  3. Accelerated gifting. Generally, if you give any one beneficiary a gift (including a 529 contribution) of more than $18,000 (or $34,000 if married and filing jointly) in 2023, you will need to file a gift tax return with the federal government. However, 529 plans include the possibility of an “accelerated gifting” option, that allows you to make five years of contributions in a single year—$85,000 for individuals and $170,000 for couples filing jointly. If you use this option, your gift tax exemption is averaged out over five years and you won’t be allowed to make additional contributions, without gift tax, to the beneficiary’s 529 account over the remainder of those years. But, when the term is up, you can repeat the accelerated giving process again. Accelerated gifting allows you to superfund a 529 account. This gives your account more time to generate interest on the total funds, instead of spacing the investment out over five years.
  4. Benefits for grandparents. For grandchildren (the beneficiaries), distributions from 529 accounts won’t count as income or change their financial aid eligibility. For the grandparent, when you move assets out of your estate into a 529 account in your grandchild/beneficiary’s name, you retain control of the assets.
  5. The Benefits of retaining control over the assets. If you’re saving for your child, grandchild, or family member in a 529 account, these funds are no longer considered part of your taxable estate. As the owner of the 529 account(s), you still get to make all the crucial decisions. You decide when to contribute money to the account, how it is invested, and when the funds can be withdrawn. You can even change the beneficiary (to another child or grandchild, for example). Retaining control over the assets while still removing them from your taxable estate is a key advantage of 529 accounts for many individuals.

Send a Message

Remembering your children, grandchildren, or even great-grandkids through a 529 account is more than a wise, tax-advantaged investment option. It’s a powerful way to demonstrate love for your family and share in ways that will improve their quality of life while showing your respect for the value of advanced education and vocational training. They’ll thank you tomorrow for the plan you set up today.

You can open an account with The Education Plan in just 5 minutes. Or talk to your financial professional about the advantages of a 529 account today!


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For more information about The Education Plan, call 1.877.337.5268 or view the Plan Description and Participation Agreement, which includes investment objectives, risks, charges, expenses, and other important information; read and consider it carefully before investing.

Please Note: Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s qualified tuition program. You also should consult a financial, tax, or other advisor to learn more about how state-based benefits (or any limitations) would apply to your specific circumstances. You also may wish to contact directly your home state’s 529 plan(s), or any other 529 plan, to learn more about those plan’s features, benefits and limitations. Keep in mind that state-based benefits should be one of many appropriately weighted factors to be considered when making an investment decision.

The Education Plan is administered by The Education Trust Board of New Mexico. Ascensus College Savings Recordkeeping Services, LLC, the Program Manager, and its affiliates, have overall responsibility for the day-today operations, including investment advisory, recordkeeping and administrative services. The Education Plan’s portfolios invest in: (i) mutual funds; (ii) exchange traded funds; and/or (iii) a funding agreement issued by New York Life. Investments in The Education Plan are not insured by the FDIC. Units of the portfolios are municipal securities and the value of units will vary with market conditions.

Investment returns will vary depending upon the performance of the portfolios you choose. You could lose all or a portion of your money by investing in The Education Plan depending on market conditions. Account owners assume all investment risks as well as responsibility for any federal and state tax consequences.

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