By Jon Dize
Director of Development & Strategic Initiatives

Only be careful, and watch yourselves closely so that you do not forget the things your eyes have seen or let them fade from your heart as long as you live. Teach them to your children and to their children after them.”

Deuteronomy 4:9 (NIV)

Whether or not you have grandchildren, grand nieces and nephews, or have the pleasure of serving as a “grand-friend” to someone, one of the most impactful ways to support their future is by investing in their education, and a 529 Plan might be an excellent option to consider.

WHAT IS A 529 PLAN?

Named for a section of the Internal Revenue Code, 529 plans are state-sponsored savings accounts that offer tax benefits to the donor when used for qualified education expenses. These expenses can include tuition, fees, books, and even room and board for college, vocational schools, and other post-secondary education institutions. Some plans also allow funds to be used for K-12 private and parochial education, and student loan repayments.

TAX ADVANTAGES

One of the most significant benefits of a 529 plan is the tax advantages it offers. Contributions to a 529 plan grow tax-deferred, meaning there are no taxes due on the earnings as the account grows. When the funds are withdrawn for qualified education expenses, they are also tax-free.

FLEXIBILITY AND CONTROL

529 plans offer a great deal of flexibility. As the account owner, you maintain control over the funds (or the parent does, if you contribute to an existing 529 plan created for the student). The beneficiary can be changed to another grandchild if the original beneficiary decides not to pursue higher education. Additionally, there are no income limits for contributors, so anyone can contribute regardless of their financial situation.

ESTATE PLANNING BENEFITS

For those concerned with estate planning, 529 plans offer a unique advantage. Contributions to a 529 plan are considered completed gifts for tax purposes, which means they are removed from your taxable estate. You can contribute up to $17,000 per year per beneficiary without incurring gift taxes, or you can choose to make a lump-sum contribution of up to $85,000 and spread it over five years. This can be a strategic way to reduce your estate while providing for your grandchildren’s future.

ENCOURAGING EDUCATIONAL ASPIRATIONS

By setting up a 529 plan, you’re not just providing financial support; you’re also sending a powerful message about the importance of education. Knowing that they have a dedicated fund for their education can motivate your grandchildren to pursue their academic goals with greater determination and confidence.

CHECK YOUR STATE PLANS

While 529 plans can be a fantastic savings tool, every state is different, and you should check what is available in your state and the states where your grandchildren (or grand- friends) live. Also, distributions can affect the student’s financial aid package, so you should call the 529 plan administrator and discuss details or view the FAQ section of their website. As always, make sure to consult with a financial adviser to understand the best strategy for you and your loved ones.

Investing in a 529 plan for your grandchildren or grand-friends is a thoughtful and strategic way to support their future and to share what you think is important for their future. The tax advantages, flexibility, and potential estate planning benefits make it an attractive option for many grandparents. It’s a gift that truly keeps on giving as you help your grandchildren achieve their dreams and build a brighter future.