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T&E TALK:  529 Plans a Win-Win

Scott T. Ditman, CPA/PFS 06.20.2016 | T&E TALK

The creation of the Section 529 educational savings program by Congress 20 years ago has been an overwhelming success. These plans allow college savings to grow tax-free, and if withdrawn for qualified higher education expenses, no tax is due. (Qualified expenses include, among other things, tuition, room and board, and computers.)

Consider these stats:

  • 12 million Section 529 accounts have been opened by parents planning for increased tuition costs as their children reach college age. These accounts can be created as early as possible after a child is born.
  • Those plans now encompass $250 billion in assets.
  • Contributions up to $14,000 per person ($28,000 per couple) in after-tax money are exempt from gift tax reporting.
  • There is no income limit on who can contribute.
  • The account can be reassigned to direct relatives (cousins, siblings) if money is left over or the beneficiary decides not to attend college. 

These state-sponsored plans represent a win-win for all parties. And as might be expected, thought is now being given to how this program can be improved. Ideas under consideration include enticing companies to “match” employee contributions, allowing more frequent trading (only two trades per year are currently allowed), and providing more investment options.

Should you have questions about creating or contributing to a Sec. 529 plan for your children, grandchildren, or another young person who is dear to you, contact me at SDitman@berdonllp.com or your Berdon advisor.

Scott T. Ditman, a tax partner and Chair, Personal Wealth Services at Berdon LLP, New York Accountants, advises high net worth individuals and family/owner-managed business clients on building, preserving, and transferring wealth, estate and income tax issues, and succession and financial planning.