Estate planning in the 529 world

It can be intimidating to have conversations with your clients about preserving their families’ legacy. But it is crucial, and my529 wants to help make those difficult discussions less daunting. Here are two ways you can use their 529 plan to navigate the way.

1. Understanding the different types of 529 accounts.

my529 offers three types of 529 accounts:

• Individual
• Institutional
• UGMA/UTMA

Deciding which type to use will then determine how your clients’ assets will be preserved/used. The following table breaks down ownership and successor options.

2. Superfunding.

You may use the five-year gift tax exemption to jumpstart a child or grandchild’s 529 account.

Federal tax rules allow an account owner to give up to $18,000 a year ($36,000 for married couples) to a child without incurring a gift tax. A unique provision for 529 educational savings plans also permits your clients to make a front-end contribution of $90,000 ($180,000 for married couples) to their accounts in one year by electing to treat the contribution as if it were made in equal installments over five years.

• Your client would need to note the contribution on IRS Form 709. (Note: Any additional contributions from the account owner above this amount to the beneficiary during the five-year period would trigger gift taxes.)
• Although such contributions are considered completed gifts, the account owner retains control of those contributions—and the account balance is not included as part of their estate.
• In addition to superfunding, you could consider a five-year + one-year gifting approach, which is as follows:
• Make a one-year gift to beneficiary using the allowance of $18,000 by the end of this tax calendar year.
• Utilize the five-year gift allowance of $90,000 at the start of the next tax calendar year.

For specific questions pertaining to contributions, please reach out to your tax advisor.

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2.???? Superfunding.

You may use the five-year gift tax exemption to jumpstart a child or grandchild’s 529 account.

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Federal tax rules allow an account owner to give up to $18,000 a year ($36,000 for married couples) to a child without incurring a gift tax. A unique provision for 529 educational savings plans also permits your clients to make a front-end contribution of $90,000 ($180,000 for married couples) to their accounts in one year by electing to treat the contribution as if it were made in equal installments over five years.

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Your client would need to note the contribution on IRS Form 709. (Note: Any additional contributions from the account owner above this amount to the beneficiary during the five-year period would trigger gift taxes.)

·???????? Although such contributions are considered completed gifts, the account owner retains control of those contributions—and the account balance is not included as part of their estate.

·???????? In addition to superfunding, you could consider a five-year + one-year gifting approach, which is as follows:

o??? Make a one-year gift to beneficiary using the allowance of $18,000 by the end of this tax calendar year.

o??? Utilize the five-year gift allowance of $90,000 at the start of the next tax calendar year.

For specific questions pertaining to contributions, please reach out to your tax advisor.