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Featured Advisor

Ed Meek
CEO/Investment Advisor

Edge Portfolio Management


State: IL

At Edge, a low client to advisor ratio allows for personal and customized service for each individual.  Our goal is to work as a team for each client to provide not only portfolio management but wealth coordination and financial planning.  We make every effort to have frequent communication with our clients and to provide timely response to calls and emails.  I also enjoy spending time with my wife and three kids, playing and following basketball, playing golf, and participating as an advisory board member for Breakthrough Urban Ministries.

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529 Plans Can Help With Estate Planning

Benefits for both grandparents and grandchildren

Tax-deferred college savings plans, which allow grandparents to remove assets from their taxable estates yet still maintain control over the funds, can be a key estate-planning strategy.

Grandparents can open a 529 College Savings Plan – or Qualified Tuition Program – to benefit each of their grandchildren. Gifts of up to $13,000 per child can be made tax free each year through the 529 plan which grows tax-free. Withdrawals from the accounts are tax-free, as well, as long as they are used for qualified educational expenses and do not exceed that amount. Contributions made to the accounts are not tax deductible.

Ownership and control make 529 Plans particularly appealing. Donors – not beneficiaries - decide how to distribute the account. Grandparents faced with an unexpected emergency may decide they need the money more than their grandchildren do and take back the assets. Under this scenario investment gains would be taxed as income upon withdrawal, and withdrawals would be subject to a 10 percent penalty tax.

The plans also allow donors to “frontload” the accounts by spreading contributions over five years, so that a lump sum gift of up to $65,000 spread over five years would not be subject to taxes.

Though there are virtually no limits on contributions to 529 Plans beneficiaries are required to pay taxes on amounts exceeding qualified educational expenses. Taxation can be avoided on plans that exceed qualified expenses when the 529 is rolled it a Qualified Tuition Plan for another beneficiary.

Grandparents may contribute to 529 plans already established for their grandchildren, but they would lose the benefit of control over the distribution of the assets.

The plans are provided and administered by each state in the nation, and investors may choose any plan regardless of where they live or where their grandchildren are going to college. Rules vary from state to state, and some give state income tax breaks on contributions made by residents to their home-state plan. It’s important to evaluate the pros and cons of the fee structure, investment portfolio and regulations of each state plan.

Contributions to 529 plans are just one factor to consider when creating a comprehensive retirement plan. Further information on 529 plans can be found at www.savingforcollege.com and www.irs.gov.