Attorney Lisa McDevitt Says 529 Plans Can Be An Estate Planning Tool
Fairfax, VA (Law Firm Newswire) November 26, 2013 – The college savings plans known as 529 plans can also be an estate planning tool.
Parents saving for their children’s college education often make use of 529 savings plans, which allow for significant tax advantages and multiple investment opportunities. According to Virginia estate planning attorney Lisa McDevitt, the plans can also be incorporated into an estate plan.
“A 529 plan is an excellent way for parents to save for their children’s future, or for grandparents to transfer assets to younger generations,” said McDevitt.
The tax advantages of 529 plans are similar to those of 401(k) retirement savings plans, but when funds are withdrawn from a 529 plan for qualified higher education expenses, the earnings are tax free. The individual who opened the 529 plan maintains control over the funds, rather than the actual beneficiary. A variety of stocks and bonds are available for investments. Each state has its own 529 plan, and individuals are permitted to roll funds over from one state’s plan to another’s. Funds may be withdrawn at any time for any reason, but if they are withdrawn for a purpose other than higher education expenses, a 10 percent federal penalty on earnings is applied, unless the child becomes disabled, passes away, or receives a full scholarship.
A 529 savings plan does not have income restrictions, unlike some other college savings programs, and the maximum savings amount is currently set at $350,000 per student in Virginia.
In Virginia, additional tax savings are available. An account owner under the age of 70 may deduct $4,000 per account per year on Virginia state income tax returns, and contributions above the limit may be rolled over to future years. Individuals age 70 and older may deduct the entire amount they contribute to a 529 plan in one year. Contributions to 529 accounts in Virginia are also free of gift tax, up to $14,000 per year, or $28,000 if married and filing jointly.
“A 529 plan provides tax savings on investment income while providing for one’s children or grandchildren,” said McDevitt. “As such, these college savings plans can be an important part of estate planning.”Learn more at http://www.mcdevittlaw.net