Compartmentalizing has its place, but in the big picture it is useful to include retirement and estate planning within a broad long-term financial plan.
When you are creating such a plan, one of the big expenses that may be part of the equation is the college tuition of your children or grandchildren. Without question, giving the gift of education may be the most profound thing that you can do for your loved ones.
There are various ways to take care of college costs, but we would like to take a look at 529 plans in this blog post.
These plans are called “529” plans because they are authorized by Section 529 of the Internal Revenue Code. Generally speaking, the way the plans work is you contribute into the account over a number of years, and when the beneficiary is ready for college he or she can utilize these resources.
There are tax advantages involved in going this route. For one, these transfers are not considered to be taxable income when your student starts to make withdrawals. In addition, if you utilize a savings plan versus a prepayment plan, any appreciation that accrues is not taxable (as long as the account is being used by the student to pay for tuition).
Depending on the specifics of the situation in question, there could be estate tax benefits involved as well.
If you would like to explore the possibilities that exist with regard to college financing, simply take a moment to arrange for an informative consultation with a seasoned, savvy Campbell CA estate planning attorney.
- Common Mistakes in Estate Planning – Part IV - December 8, 2022
- 2023 Estate Tax Exemption and Gift Tax Exclusion Update (Video) - December 7, 2022
- Common Mistakes in Estate Planning – Part III - November 30, 2022