November 13, 2013
In any given year, one can give away up to $14,000 without triggering a gift tax. This is $14,000 per person per year. So, if you have a son, daughter, son-in-laws, daughter-in-laws and grandkids, you can gift up to $14,000 a year to each one of them. Some individuals gift actual stock and may gift actual cash. The benefit is that this money comes our of our estate, which could help minimize estate taxes.
Only with the 529 plan can you speed up the gifting for 5 years. So, you can put ($14,000 x 5 = $70,000) away today in a 529 plan but then you cannot add for the next 5 years. This can be a great estate planning tool for people that want to take money out of their estate if they want to help kids or grandkids for college.
Prior to investing in a 529 plan, investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other benefit that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.