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Dear Megan,
Autumn brings football, talk of Halloween costumes and pumpkin spice lattes. While we can’t tell you how many different food items use pumpkin spice, we can talk about 529 plans and some creative ways to use these flexible savings plans. Let’s dive in!
What is a 529 plan?
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. 529 plans are authorized by Section 529 of the Internal Revenue Code
For Grandparents
Thirty years ago, it was conceivable to work part-time and pay your way through college. Now, college costs have grown much faster than wages, making this impossible. For our clients who value higher education and can help, we recommend a 529 plan for grandchildren. The plan is owned by one of the grandparents and can benefit any of their family members. Younger parents often ask, “how can we ask our parents to donate to college funding instead of buying our kids more toys?” Contributions to a 529 can be made monthly or in a lump sum. It is a great way to gift money and moves it out of your estate.
For Parents
Don’t be discouraged by rising college costs, just get started. Cass started saving $50 per child per month when her children were in kindergarten and first grade. It did not seem like enough, but by increasing the amount as frequently as she could, she and her husband were able to fully fund 529 plans for each of their sons. Again, just get started.
Frequently Asked Question – Using the Funds
There are no time or age limits on using a state 529 savings plan. If all the money isn’t used for one child, the owner can change the beneficiary to a sibling, cousin, or parent.
Distributing the funds is very easy! Distribution requests can be made online or over the phone. While it isn’t necessary to show an offsetting receipt when requesting funds from a 529, we recommend keeping records for tax purposes.
As always, please reach out if you would like to discuss this further!
Sincerely,
Cass, Bleckley and Megan
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