Doing what you can to see to it that your younger family members receive a college education can be an important part of your legacy. There are different ways of going about this, but we will take a look at 529 plans here.
The name of these plans is derived from the section of the Internal Revenue Code that applies to them. And indeed, there are tax advantages involved in contributing into these accounts and this is part of the appeal.
529 accounts are offered by individual states, and they come in two forms: prepayment plans and savings plans. The former type is somewhat self-explanatory in that you pay for the college expenses in advance at a locked-in rate.
With the savings plan you contribute assets into the account and they are invested over the years in an effort to gain appreciation. Once the student becomes ready to enter college he or she can access the resources to pay expenses.
These distributions are not subject to federal income tax, and the earnings on the contributions are not taxable either as long as the student does indeed wind up utilizing the funds to pay for college.
From an estate planning perspective as you are placing funds into the 529 account you are reducing the taxable value of your estate.
Should you be interested in learning more about 529 plans and other ways to set aside resources for college expenses simply take a moment to arrange for an informative consultation with a seasoned, savvy Central New Jersey estate planning lawyer.