529s Can Be Estate Planning Vehicle


529s Can Be Estate Planning Vehicle


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There are many tax benefits to 529 college savings plans including tax-free growth and tax-free withdrawal when the 529 funds are used for qualified expenses. Many states also provide a state tax deduction or credit on 529 plan contributions. Another important benefit is the potential use of 529 accounts for gifting and estate planning. A unique advantage of 529 plans is that contributions to a 529 account for a beneficiary are considered gifts, yet the account owner retains full control over the account during his or her lifetime.

A donor can gift up to $18,000 annually per 529 beneficiary free of federal estate and gift tax impact if no other gifts to the recipient are given that year. The federal tax laws also permit a donor to a 529 account to front load five years of gifting -- or $75,000 per person. A couple can gift $150,000 for a child or grandchild and then repeat the process in year six. If the donor dies before the five years are up, a prorated portion of the contribution will be considered part of the donor’s taxable estate.

“A donor with considerable wealth and five grandchildren could potentially remove up to $375,000 from his or her federal taxable estate by contributing money to five separate 529 plan accounts,” explained Ted Miller, Executive Director of the New Mexico Education Trust Board, the organization that sponsors the New Mexico 529 Plans – The Education Plan® and Scholar’s Edge®. “It’s a great vehicle for lightening the estate tax load on your loved ones while supporting future generations by providing funding for their college education.”

The Education Plan® has information available at TheEducationPlan.com or by calling 1(877) 337-5268. The Scholar’s Edge® plan is offered by financial professionals. Information for financial professionals is available at ScholarsEdge529.com or by calling 1(800) 787-1621.


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The Education Plan® and The Education Plan® Logo are registered trademarks of The Education Trust Board of New Mexico used under license.

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For more information about The Education Plan, call 1.877.337.5268 or view the Plan Description and Participation Agreement, which includes investment objectives, risks, charges, expenses, and other important information; read and consider it carefully before investing.

Please Note: Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s qualified tuition program. You also should consult a financial, tax, or other advisor to learn more about how state-based benefits (or any limitations) would apply to your specific circumstances. You also may wish to contact directly your home state’s 529 plan(s), or any other 529 plan, to learn more about those plan’s features, benefits and limitations. Keep in mind that state-based benefits should be one of many appropriately weighted factors to be considered when making an investment decision.

The Education Plan is administered by The Education Trust Board of New Mexico. Ascensus College Savings Recordkeeping Services, LLC, the Program Manager, and its affiliates, have overall responsibility for the day-today operations, including investment advisory, recordkeeping and administrative services. The Education Plan’s portfolios invest in: (i) mutual funds; (ii) exchange traded funds; and/or (iii) a funding agreement issued by New York Life. Investments in The Education Plan are not insured by the FDIC. Units of the portfolios are municipal securities and the value of units will vary with market conditions.

Investment returns will vary depending upon the performance of the portfolios you choose. You could lose all or a portion of your money by investing in The Education Plan depending on market conditions. Account owners assume all investment risks as well as responsibility for any federal and state tax consequences.

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The Education Plan® and The Education Plan® Logo are registered trademarks of The Education Trust Board of New Mexico used under license.

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Not FDIC-Insured. No Bank, State or Federal Guarantee. May Lose Value.