Hyden, Miron & Foster, PLLC Law Blog

Thursday, February 25, 2021

The Estate Planning Benefits of a 529 Savings Plan

Do you have kids, grandkids, or loved ones that will face the often significant costs associated with getting an education? These costs can start early with private school tuition. At the college level and beyond, the tuition and expenses seem to increase again and again. Student loan debt is a burden on so many and it can be difficult for them to see any light at the end of the tunnel. To help the next generation start out with a clean slate, many look for ways to provide financial support for educational endeavors. One such way is through a 529 savings plan. Did you know that a 529 savings plan can also have significant estate planning benefits? We will talk more about that here.

The Estate Planning Benefits of a 529 Savings Plan

A 529 savings plan allows a person to establish an investment account to benefit the listed beneficiary as an education is pursued. In recent years, 529 savings plan uses have expanded as they can now pay for costs associated with private school tuition in the earlier educational years. Previously, a 529 plan could only be used on college and higher education expenses. In addition to tuition, the funds from a 529 savings plan can be used to pay for room and board, books, and other expenses associated with obtaining an education at an institute of higher education. The distributions from a 529 savings account will avoid taxation as long as they go towards covering eligible educational-related expenses.

As you can see, a 529 savings plan is a great way to get tax savings on an investment account that will help support the educational goals of your child, grandchild, or loved one. This is a great gift to give them. Speaking of gifts, one of the big estate planning advantages of a 529 savings plan is the fact that you can make substantial tax-free gifts to the 529 savings plan. You can transfer money into the account and, as long as it falls below the gift tax exemption amount, it will not be subject to taxation. It also has the additional benefit of removing those funds from your taxable estate. Estate taxes can be substantial, to say the least. Gifting these funds prior to you passing away will remove them from your taxable estate and allow them to grow in the 529 savings plan.

The flexibility offered by a 529 plan is also beneficial for many reasons. If the initially listed beneficiary does not use all of the funds in the 529 plan, the beneficiary can easily be changed. Furthermore, subsequent beneficiaries can be listed in the 529 plan. This means that you could even provide educational support for generations to come.

Estate Planning Attorneys

A strong estate plan will consider how you can provide the most effective financial support to your loved ones. It will protect your best interests and those of your family. Put an estate plan in place today and take a major step towards achieving the goals you have for you and your loved ones. The experienced estate planning attorneys at Hyden, Miron & Foster, Contact us today.

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