Houston Estate Planning and Elder Law Attorney Blog
529 plans are a great way to help parents with taxes and college costs. Grandparents, aunts and uncles and anyone who wants to pitch in, can also benefit.
Starting to put aside money in a 529 college plan when children are very young, is a wonderful way to push yourself to save over an extended period of time, with some added benefits. Your kids get the advantage of having more funds to draw on for college, and you get an investment that grows tax free. It’s a good deal for everyone.
The Green Bay Press Gazette’s recent article, “Benefits of 529 college savings plans keep giving,” reports that the state of Wisconsin’s 529 plan is called the Edvest College Savings Plan.
Opening an account is simple. It can be done online or by mail, and it takes just $25 to start.
529 plan contributions help you save more money because your investment grows tax deferred, while they’re invested in the plan. You can select your investments or use age-based options that change, as the beneficiary gets closer to college age. The distributions are tax-free, if they’re used for qualified education expenses.
Note that Wisconsin residents can also benefit from some unique tax advantages and your child still can attend school in another state. Your Edvest 529 plan can be used in any state and even at certain colleges abroad. Some rule changes this year mean that funds can also be used for K-12 school tuition, in addition to college or vocational schools.
Grandparents are also able to create 529 accounts to benefit their grandchildren. If your grandchild doesn’t need the funds for school, you’re allowed to transfer the beneficiary designation to another grandchild or family member.
There are also estate planning benefits to opening a 529 plan. The annual gift tax exclusion is $15,000 for a single person, and Wisconsin’s Edvest plan lets you to give up to five years’ worth of gifts at one time. You could gift $75,000 for a single filer and $150,000 for couples.
New parents may find it hard to imagine their sweet little babies as college students, but those years fly by. Before you know it, you’re packing up the car to take them to their first year at college. Start by saving in a 529 account soon after they’re born and invite other family members to also participate.
Reference: Green Bay Press Gazette (July 13, 2018) “Benefits of 529 college savings plans keep giving”