The holiday season is here, and so is the deadline for gifting contributions to 529 accounts — an attractive opportunity for those wanting to ease the soaring cost of college for family members.
December 31 is your last chance to contribute to a 529 account for your kids’ or grandkids’ education. Despite the benefits, industry data suggest that these investment vehicles are underused. There are 12.7 million accounts, but the average account balance is just under $21,000, according to the College Savings Plans Network. That’s less than one year of tuition at most public universities. And, it’s a missed opportunity, because these accounts offer a flexible, tax-efficient way to pay for a college education.
You can set up multiple 529 accounts to cover different children or grandchildren, and an individual can be named as a beneficiary on more than one account, so a parent and a grandparent can set up separate accounts for the same future student. No matter how a 529 account is established, it offers significant benefits for both owners and beneficiaries.
Perks for 529 gift givers
There are several tax and estate-planning advantages for 529 accounts that put owners in the driver’s seat of their investment. The tax code considers an investment in a 529 to be a gift to the designated beneficiary on the account, even though it remains under the control of the account owner.
“The tax code deems investments put in a 529 to be a gift to the designated beneficiary — even though it’s not really a gift because the money remains under the control of the account owner.”
- Chris Stack, SavingforCollege.com