Estate planning: The potential benefits of accelerated gifting into a 529

A key aspect of estate planning is guiding clients in creating their legacies. For many, that legacy includes giving the gift of higher education to their loved ones. How clients choose to fund that gift can have big tax implications for their estate — and for the earning potential of the college savings account. Here’s what you, and your clients, need to know about accelerated gifting through 529 plans.

What your clients need to know about accelerated gifting

529 plans are one of the best ways to invest in a child's future, as they offer tax-deferred growth and tax-free withdrawals¹ for qualified educational expenses. They also come with significant estate planning benefits.

An individual can give up to $18,000 per year to a loved one’s 529 plan without incurring gift taxes. But clients who are looking for a faster way to minimize their estate taxes have the option to give a much larger tax-free gift with a strategy called accelerated gifting.

Here’s how it works:

• Your client can make up to five years' worth of gifts at one time — for a total gift of $90,000 per person or $180,000 per married couple — free of gift taxes. This removes those funds from the taxable estate.
• Since your client's assets will be invested over a longer period of time, they have more time to potentially grow compared to an investor who simply contributes annually.
• If your client is also the owner of the 529 account, they have complete control over how the assets are invested. Though tax penalties may apply to the use of funds for non-educational purposes, funds can be accessed for emergency use.

Accelerated gifting in action

Say a client gives the maximum accelerated gift of $90,000, and assume an annual rate of return of 5%. Over the course of 18 years, the investment could generate $216,596. If a married couple contributes $180,000, the amount generated would be $433,191.²

Consider CollegeBound 529

All in all, your clients can help their children, grandchildren, and other loved ones save for their education in one of the best possible ways, and help reduce their estate tax burden at the same time — helping create higher learning and wealth-building opportunities for many years to come. To learn more about how you can help you and your loved ones build their legacy with accelerated gifting 529 plans, read more in our guide.

CollegeBound 529 offers financial professionals direct access to 529 and college savings experts, providing them with the outstanding support needed to nourish and build client relations and to help investors realize their goals. Check out our Education Savings Toolkit or call 1-877-615-4116 to help launch a successful journey for you and your clients today!