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A 529 plan could be a good way to reduce the value of your estate

On Behalf of | Mar 12, 2020 | Estate Planning |

For estate tax planning, one thing you may be interested in is a 529 plan. This is a plan that is designed to help reduce state and federal estate taxes. According to Section 529 of the Internal Revenue Code, no amount of money can be included in your estate for the purpose of estate taxes if it is of an interest to a qualified tuition program. What that means is that if the assets in your estate plan are designated to be used in a 529 plan, then they may reduce the overall value of your estate and will not be taxed.

529 plans are beneficial because they give you a way to make sure that your beneficiary is getting what they need to attend school. They can use the distributions for all qualified higher educational expenses. Any of the funds that are used for other purposes can be taxed with a penalty, so it’s essential not to use them for other purposes.

For the purpose of distributing wealth and reducing the amount of estate taxes you need to pay, the 529 plans you can set up are extremely helpful. It’s important not to overfund the plan, since beneficiaries would be taxed and assessed penalties for using the money for other purposes that are not educational, but overall, this is a possible solution if you’re looking to reduce your estate’s value.

If you have questions about 529 plans, it may be helpful to speak with someone familiar with estate planning. The laws can be complex, so you want to make sure to follow the rules regarding tuition programs carefully.


Law Offices of Joseph J. Tock