Most parents think long term when it comes to the educational needs of their children. A 529 plan is a common method for funding a child’s education because there are numerous different beneficial features such as:
· Flexibility
· Tax deductible contributions
· Tax regrowth of assets
· Generally clear investment options
For those who may not be facing potential estate tax issues, however, there can be a more beneficial approach that can reduce your future estate tax and fund educational costs. This is based on your eligibility to make qualified transfers that do not enter into a person’s lifetime or annual exclusion. Qualified transfers are those direct payments made for educational and medical purposes. These annual exclusion gifts can be used to fund trusts for education or for other purposes and then the person making the gift could pay educational expenses directly since these payments do not count against the lifetime or the annual exclusions. Scheduling a consultation with a caring Pasadena estate planning attorney is strongly recommended if you find yourself concerned about how to protect your child’s interest and minimize your own estate tax consequences in the future.
