529 Plans are terrific college savings plans.  Your cash contributions can be invested as you see fit, and investments grow tax deferred.  In addition, 529 Plan distributions are  distributed for qualified college expenses tax free.

Each 529 Plan (named for the authorizing section of the Internal Revenue Code) can only have one beneficiary.  You or a trust can own the 529 Plan account and other relatives and friends can contribute to this same account.

If you have extra assets, you can superfund 529 Plans with 5 years worth of annual gift tax exemption.  Each year you have a $13,000 annual gift tax exemption.  This means that you can give up to $13,000 to as many individuals, such as grandchildren, as you would like.

“Superfunding” means that you can contribute 5 x $13,000 which is $65,000 to each grandchild’s 529 Plan at one time without gift tax and without using any unified credit exemption.  If you’re married, you can put up to $130,000 into each grandchild’s 529 Plan.  However, you can’t make any other gifts to your grandchildren during the next 5 years.

Because of this limitation, you may want to either put less in the account, so you can still make birthday and Christmas gifts, or go ahead and place a larger amount of money in the accounts using your unified credit exemption.

This year (2012),  you and your spouse can each give away up to $5 million; that’s $10 million total without paying gift taxes or any other taxes.  This is called the “unified credit exemption.”  It’s “unified” because you can give money away during your lifetime or at your death…it’s one unified exemption.  (529 Plans have asset contribution limits set by the state that runs the plan based on the projected cost of a four year private university.)

If there’s a downside to 529 Plans, it’s that you have to contribute cash and you can’t contribute investments.   Investments would need to be sold and the cash deposited in the 529 Plan and the sale may trigger income tax.

If youare interested in college planning for your grandchildren and 529 Plans to be part of your estate planning, consult with a qualified estate planning attorney.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

529 Plans are college savings plans that are named for the Internal Revenue Code section that authorizes them.  They have outstanding tax benefits and should be considered by every family.

The assets in 529 Plans grow tax free, so you benefit from compounding (like the credit card companies benefit from compound interest).  You earn money on your contributions and their growth.

In addition, the 529 Plan asset distributions are tax free when you use them for qualified educational costs like tuition.

There’s a great website (www.savingforcollege.com) where you can learn a lot more and compare the numerous state plans.  You don’t necessarily have to be a resident of a particular state to participate in the plan; many are open to a resident of any state.

Consider the fees and tax benefits when choosing a plan.  For example, there may be set up fees, account maintenance fees, and investment fees.   While the federal income tax benefits are the same for each plan, the state income tax benefits may differ.  For example, some state plans allow their residents to avoid the state income tax on withdrawals.

Minimum contributions are truly minimal so you can most likely meet the minimums.  In addition, if you want to superfund the 529 Plan, you can do that too.  For example, you can use your annual gift tax exclusion to fund 5 years worth of exclusions at one time.  This would be up to $65,000 for each 529 Plan beneficiary.  If you’re married, the annual gift tax exclusion for 5 years is $130,000.

You can set up as many 529 Plans for as many individuals as you would like (i.e. all of your grandchildren.)  In addition, aunts, uncles, parents, and others can all contribute to the same plan you set up.

You do have to invest cash; you cannot transfer investments into a 529 Plan.

To determine how tax free 529 Plans fit into your overall estate plan, consult with a qualified estate planning attorney.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

Parents with young children have many added responsibilities, including the need to plan for the future.  With the right planning tools in place, you can make sure that your children are always protected.  We’ve taken the time to outline some estate planning considerations, to help you think about your planning needs.  If you have any questions, or if you’d like to discuss other ways in which parents with young children can plan for the future, contact an estate planning attorney.

• Who will be the guardian for your minor children?  With your Will, you can appoint a trusted and loving guardian.  Many parents with young children forget about this important need.  You also need to appoint temporary lifetime guardians in case you are ever disabled and unable to care for your children.  This can’t be done in a Will; your estate planning attorney will draft a stand-by guardianship authorization as part of your estate plan.
• Do you want to provide for the management of the assets that you leave behind? With an estate plan, you can appoint a custodian to manage the assets that you leave behind for your minor children.  This ensures that the money is used correctly to benefit each child.  Trusts are a great way to leave assets for children.
• Do you want to invest in life insurance so that your children always have the money that is needed to survive? Life insurance policies are especially beneficial for individuals who have families.  This makes it possible to have assets for the continued care of loved ones.
• Would you like to begin saving for future college expenses?  It can be beneficial to start saving for college as soon as possible.  There are many great planning tools that make this possible.  For example, this may include using a 529 plan.

As a parent, it’s important to focus on the future.  Make sure that you have a solid plan in place so that your children are always protected.  If you have any additional questions about the above ways in which parents with young children can plan for the future, consult with a qualified estate planning attorney.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

It’s not only important to take time out of your busy schedule to do your own estate planning, but also to consider college savings plans.  If you have a child or grandchild, you may want to contribute to his or her college education.  This can be achieved with the use of a college savings plan.

Take a look at some of the information below to learn more about Arkansas college savings plans.  If you have any questions, meet with an estate planning attorney.

This blog post discusses the iShares 529 Plan.

What is the iShares 529 Plan?

This savings plan is a way for individuals to save for the future costs of education.  In order to get started with this college savings plan, you will need to make an initial contribution of $500.  You will also need to commit to contributing a minimum of $50 each month or $150 each quarter.

This plan offers different investment decisions to help diversify your investments.  The account maintenance fee for this plan is only $10 and is waived if you have over $20,000 in your account.  You’re able to reach a maximum account balance of $366,000 with this plan.

What are some of the benefits of the iShares 529 Plan?

There is no application fee to get started.

Additionally, most people find the low $10 yearly maintenance fee to be extremely beneficial.

You’re able to take advantage of state tax deductions for your contributions, which can include up to $5,000 or up to $10,000 for married couples.

With a maximum account balance of up to $366,000, you also have the opportunity to save a lot of money for your child’s college expenses.
Don’t put off your college savings goals.  If you have any questions regarding your estate planning or college savings plans, consult with a qualified estate planning attorney.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

If you’re thinking about the future, you may have already created an estate plan.  Many people don’t take the time to carefully consider college savings plans.  Taking the time to do this can allow you to contribute to your child’s education throughout your lifetime.

Look at the following information to learn more about your Arkansas savings plan options.  If you have any questions, meet with an estate planning attorney.

This blog post discusses the GIFT College Investing Plan.  This is one of the plans that you may want to consider investing in.  A second option is discussed in part 2 of this 2 part article.

What is the GIFT College Investing Plan?

This plan allows an affordable way to begin your college planning.  With as little as $10, you’re able to start your savings.  You will be required to commit to investing a least $10 a month or $30 per quarter.

This plan offers many different investment options for a varied investment.

You’re able to reach a maximum account balance of $366,000.

Additionally, the state will match your contributions depending on your income level! This includes a matching grant of up to $500.  In order to qualify for this benefit, you must have an AGI of $60,000 or less.

What are some of the benefits of the GIFT College Investing Plan?

There are many tax benefits to this savings plan.  You’re able to take advantage of tax deferred growth.  If you make withdrawals from your account for education related expenses, distributions will be free from federal income taxes.

As an Arkansas resident, you’re able to take advantage of state tax deductions by deducting up to $5,000 or $10,000 for married couples, of your contributions.

Additionally, the fact that you may be able to take advantage of matching contributions, can make this plan extremely attractive.

If you have any questions about your estate plan or college savings plans, consult with a qualified estate planning attorney.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.