529 College Savings Plans and Tax-Free Growth
College is getting tougher and tougher to pay for, but a 529 plan can be a really big help. Did you know that contributions to 529 plans are not taxable on the growth or income generated when spent on tuition or other approved expenses? Tax-free does not appear many times in the American Tax Code.
What’s a 529 Plan?
If you're concerned about a potential estate tax as part of your legacy, there’s a smart strategy that could help reduce that burden while also supporting your family’s future. By contributing to a 529 savings plan, you can shrink the size of your estate, which may save you on Washington and/or Federal estate taxes, and at the same time, help fund your grandchildren's education. It's a win-win, but it’s important to consult your tax or legal advisor to determine how this strategy fits into your overall financial plan.
Starting a 529 savings plan is more accessible than you might think. For as little as $25, you can open an account and begin contributing toward your grandchild’s education. One great option to consider is the Iowa 529 Plan. Since Washington doesn’t have a state income tax, you’re free to choose from any state’s plan, and the Iowa plan offers low-cost Vanguard funds and a low minimum of $25 to start. Can you really say you can’t afford to begin saving for your grandchild’s future?
Here are a few key benefits of a 529 plan:
Flexibility: If one child in your family receives a scholarship, you can easily switch the plan’s beneficiary to another family member.
Investment Options: These plans include a range of investment choices, typically in stock and bond funds, giving you the opportunity to tailor your investment strategy to fit your financial goals, risk tolerance, and overall objectives. It’s a good idea to work with your financial advisor to make sure your investment choices align with your broader financial plan.
A 529 savings plan provides a valuable resource for education funding and can also be a tool for managing estate taxes. By taking this step, you're helping to build a meaningful legacy while providing your family with a powerful financial advantage.
Ready to learn more?
Here's a link to the Iowa 529 Plan to get started.
If you have any questions or want to discuss how a 529 savings plan can fit into your estate planning strategy, contact Skyline Advisors today. We're here to help you make informed decisions about your financial future.
The content of this blog is for informational purposes only and should not be construed as investment, tax, or estate planning advice. Skyline Advisors, Inc. is an SEC Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where representatives of Skyline Advisors, Inc. are properly licensed or exempt from licensure. If indices are referenced in marketing material, it is important to note that these cannot be invest in directly, any vehicle such as Passive index-based ETFs and Mutual Funds which attempt to replicate indices have internal expense ratios and other associated costs that would negatively impact returns. No advice may be rendered unless a client service agreement is in place. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.
