People tend to think of “529” education-savings plans as a nifty way to save and invest tax-free for college or schooling costs, and they are. But accountants, estate lawyers, and financial planners say they also are flexible estate-planning tools that can have utility beyond education spending and cost almost nothing to set up.
They could become even more valuable as the White House is likely to seek higher taxes to fund expanded government programs. During his campaign, President Biden proposed chopping the estate tax exclusion from its current level of $11.7 million per person. If the exemption is lowered to $5 million or even $3.5 million, as some in Congress want and Biden has suggested, millions of American families suddenly could be looking for ways to reduce their estates.
That’s where 529 plans come in. Most tactics to reduce the size of your estate are irrevocable; once you’ve let go of the money, you can’t get it back. By contrast, you can change beneficiaries and even owners on 529 plans multiple times. Handled correctly, you can turn your 529 plan into a tax-free money pot that will fund the education of your children, their children, and maybe even generations beyond that.
“It’s probably the most underutilized estate-planning technique,” says Bruce Weininger, a Chicago certified public accountant and financial planner. “It is essentially a revocable, irrevocable gift.”