Investment Options

 

Estate Planning and Gifting Benefits of 529 Plans

529 Plans are particularly popular with grandparents who wish to invest in a grandchild’s future because they offer significant estate planning benefits. Funding a 529 account is considered a gift to the beneficiary for estate tax purposes – all contributions and earnings grow outside your taxable estate. Plus, unlike other gifting programs, a 529 plan enables you to retain control over the accounts and its assets.



This illustration is hypothetical and not representative of the performance of any particular investment.
There are risks associated with investing, including the possible loss of principal.

Jane and William Brown, Grandparents

Chart assumes a 6.5% annual return compounded monthly.

Grandparents investing for grandchildren


You can contribute up to $14,000 ($28,000 for married couples) per beneficiary per year without triggering federal gift taxes. However, special 529 rules allow you to use five years of annual exclusions at once for a tax-free gift of up to $70,000 (joint taxpayers may fund $140,000). Your federal lifetime gift tax credit may also be available for funding your 529 account.

Assets placed into a 529 College Savings Plan are considered removed from the donor’s estate for tax purposes. An exception to this rule is if the Account Owner passes away and is listed as the Designated Beneficiary on the account. In this instance, the value of the account will be included in the account owner's taxable estate. You should consult a qualified tax advisor for any tax related issues involving your MI 529 Advisor Plan account.




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