Gift a 529 Plan This Holiday Season

With people flocking to malls and shopping centers to find the perfect holiday gift, the best gift may be that of higher education. 

Right now in the U.S., half of the country’s families are not saving for college.  Of those that are, the majority are using general savings accounts to fund soaring college expenses.  Yet, by using 529 plans, American families can invest for college using the power of tax-deferred compounding to accumulate more for education. 

Now is the perfect time for financial advisers to discuss these investment vehicles with clients and prospects.  529 plans allow contributors to front-load five years’ worth of their annual gift tax exclusion in a lump sum.  This allows individuals to gift up to $70,000 and married couples up to $140,000 per beneficiary.  For families with multiple children and grandchildren, this becomes a massive tax savings for the estate.  Moreover, 529s allow for greater flexibility with beneficiaries, so the funds are never blindly passing to the next generation.  Account owners always have control over how assets are dispersed, and there are no income limits or age restrictions. 

See Michael Conrath, The Season of Giving is the Perfect Time for 529 College Savings Plans, Investment News, Dec. 2, 2014.