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Jim Lentini: Gifting and 529 college preparation

Posted: January 25, 2010 4:42 p.m.
Updated: January 26, 2010 4:55 a.m.
Investing in education is one critical way to help secure a child's future.

Gifting money into a 529 savings plan can offer benefits to the account holder and the beneficiary.

With college costs on the rise and government subsidies of education on all levels a challenge for the immediate future, financing an education can be a challenge.

When putting together college savings investment strategy, the following advantages of a 529 plan can be very beneficial to donors:

Tax advantages 
* Any investment growth is tax-deferred;

* Federal tax-free distributions when used to pay for qualified higher-education expenses;

* Ability to make up to five years of contributions at one time;

* Removes sizable amount from donor's federal taxable estate.

* High contribution amounts;

* No income or age limitations;

* Use funds to pay for expenses like tuition and room and board at any eligible college, university or graduate school in the U. S.;

* Anyone can contribute to the account: parents, grandparents, friends, aunts, uncles, etc.

* The account holder decides who the beneficiary is, how much money is to be invested and when and how the money is to be distributed;

* The account holder can change the beneficiary to another member of the current beneficiary's family at any time.

Gifting contributions to a 529 savings plan are considered gifts for federal gift tax purposes and qualify for the federal gift tax exclusion.

Generally, a gift up to $13,000 from an individual or $26,000 from a married couple filing jointly per beneficiary recipient, per year is excluded from federal gift tax.

Additionally, 529 savings plans have a special feature known as accelerated gifting.

This allows a donor to contribute currently up to a maximum of $65,000 (individual) or $130,000 (married, filing jointly) to a single beneficiary in the first year.

Gifting can be a powerful way to save for college and a great way for grandparents to help with the planning, removing assets from their estate while controlling the benefits and investments for grandchildren.

Discussion with your financial advisor will help evaluate your options and answer questions of how 529 Savings Plans can help in your personal and financial planning.

Jim Lentini, CLU, ChFC, IAR is president of Lentini Insurance & Investments, Inc. His column reflects his own views and not necessarily those of The Signal.


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