Paying for college is expensive and more and more grandparents are stepping in to help. You see, based on historical college data, the cost of a college education roughly triples over a 20-year period. That means, from the moment your grandchild is born they will face an average annual growth rate of 6.8%.
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A 529 plan is a tax-advantaged savings method used to cover education expenses for future generations. A 529 plan can reduce a grandparent’s estate, minimize potential gift tax, and helps to minimize estate taxes.
The benefit of 529 plans is that the value of the account is removed from the taxable estate while the account owner retains full control, including the right to select the beneficiary, direct the assets, reallocate the money, or take it back.
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Contributions grow on a tax-deferred basis. |
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Withdrawals used to pay the beneficiary’s qualified education expenses are tax-free at the federal level. |
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All contributions qualify for the annual federal gift tax exclusion of $15,000 for individuals or $30,000 for joint gifts in 2021. |
Taking advantage of the ability to fund a grandchild’s college education is a win for current and future generations.
Let’s discuss how this strategy may work in relation to your comprehensive financial plan.
