Did you know that many parents use 529 savings plans as a way to let their child’s college funds grow tax-free? These plans, however, are not just for parents and children. They are also not limited to use for tuition. Parents, grandparents, and other adults with children, grandchildren, nieces, or nephews can use a 529 savings plan not only to fund college tuition, but to ensure that a myriad of other expenses are covered for their loved ones, now and in the future, by making a 529 savings plan part of their estate plan.
Unlike other tuition savings programs, money put into a 529 savings plans can be used not only for tuition, but also for room and board costs, books, special supplies, and equipment for different types of higher education, like art supplies for a design student, computers, and other electronic devices, and even Internet access. If you have a child or grandchild with special needs, money from a 529 plan can be used for any expenses specific to their needs as well. Funds from a 529 savings plan can also be used for graduate level education, for example, law school or medical school.
Here is where using 529 savings plans as an estate planning tool can truly broaden the scope of your savings. You can use the money in a 529 savings plan to pay expenses for your child or grandchild. You do not, however, have to spend it all at once. In fact, you do not ever have to spend it all. You can cover the expenses of loved ones who need it during your lifetime and leave the rest in the savings plan to be passed on after your death, to be inherited by the beneficiary of your choice.
This means that your grandchild could benefit from funds in the plan right now, and many decades down the road, he or she can use funds that were left in the plan to pay his or her own grandchild’s higher education expenses. In this way, using a 529 savings plan may be the perfect estate planning tool as it allows you to pay for the higher education expenses of your descendants, generations into the future.
If you are interested in learning more about how a 529 savings plan can be a valuable part of your estate plan, contact our office today to schedule a meeting.