When you make a gift to a loved one’s 529 account, you do it because you want to give the gift of education. At the same time, you should enjoy the tax advantages offered by ScholarShare 529. Learn why there’s more than one reason to make a gift contribution to a 529 plan. Consult your tax advisor.
How ScholarShare 529 Helps with Your Estate Planning
- There is no federal gift tax on contributions you make up to $15,000 per year if you are a single filer, or $30,000 if you are a married couple.
- You can also accelerate your gifting with a lump sum gift of $75,000 if you are a single filer or $150,000 if you are married, if you pro-rate the gift over 5 years per the federal gift tax exclusion.
- The ScholarShare 529 accounts are not subject to the ‘Kiddie Tax’.
- You can gift this amount to as many individuals or beneficiaries as you like, free from income tax.
What Federal Gift and Estate Tax Planning Means to You
If your estate exceeds the exempt amount, estate taxes can be quite high — in some cases more than 40%. Since contributions to ScholarShare 529 are considered a completed gift for federal gift and estate tax purposes, it’s removed from your estate, and can help reduce your future estate tax exposure. Plus, you can do this without incurring the federal gift tax as long as your contribution is within the current exclusion limits. This holds true whether you are the account owner or simply a contributor.
Federal tax law is complex and there are state and local taxes to consider, as well as your personal life situation and other circumstances. While the many tax advantages associated with ScholarShare 529 can be an important part of your financial planning process, you may want to consult with a tax advisor to get a full understanding of how these benefits affect your estate.