Santa Fe, NM, April 06, 2021 (GLOBE NEWSWIRE) -- Grandparents are a source of encouragement, inspiration and support to their grandchildren. By contributing to a 529 college savings account, grandparents can provide vital support for academic and career success. A 529 plan also can be used as a way to transfer wealth and reduce potential estate taxes.
“Studies have shown that children with as little as $500 saved in a 529 plan are three times more likely to attend college and four times more likely to graduate,” said Ted Miller, Executive Director of the Education Trust Board of New Mexico, the state agency that administers The Education Plan® 529 college savings plan. “Of course, the best plan is to start when the grandchildren are young and to add to the account regularly. Contributions accrue earnings, and the account can have a life-changing, positive impact on those you love most.”
The Education Plan® can be used as a tool for estate planning. 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 $15,000 annually per 529 beneficiary free of federal estate and gift tax impact, if no other gifts are given to the recipient that year.
The federal tax laws also permit a donor to a 529 account to front load up to five years of annual gifting – or $75,000 per person. A couple can gift $150,000 for a 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 estate.
The Education Plan® also offers tax benefits. Contributions are tax-deductible on some state income tax returns, and earnings grow free of state and federal taxes. Withdrawals are also tax-free when used to cover qualified education expenses.
“There are many benefits to opening up an account with The Education Plan®–the most important one being the huge difference you can make in your grandchild’s life,” added Miller. “Being a grandparent is one of the most joyous roles we can have in life, and having the opportunity to brighten the future for a grandchild makes it even better.”
Miller also noted that the estate planning and income tax benefits of contributing to a 529 plan apply whether the account is opened by a grandparent or another family member.
The Education Plan® can be used to cover tuition, housing, meal plans, books, supplies, computers and fees at schools nationwide—vocational or trade schools, professional schools, colleges and universities—making it a versatile gifting option for grandchildren of any age. A 529 college savings plan account can be opened with as little as $1, and contributions can be made at any time.
To learn more about The Education Plan®, visit TheEducationPlan.com or call 1-877-337-5268.