Including 529 College Savings Plans in Your Practice | Capital Group

College Planning - How-To Guides

November 2015

Including 529 College Savings Plans in Your Practice

Saving for college is a major investing goal for many families, and many clients will look to advisors for help. This video shows the benefits 529 plans can bring to your practice, your clients and their heirs, and gives important insights into estate considerations and 529s.



Narrator: There’s a common misconception among some advisors that 529 plans aren’t worth the trouble because the initial investments tend to be small. But not only are 529s important to your clients, they can be a valuable tool when considering your clients’ estates — and can become a meaningful part of your practice. For example, 529s can be used to transfer assets out of a client’s estate without gift tax consequences.

Here’s a strategy that can help you expand your services for your clients. As you know, gifts to family members can trigger gift taxes, though few clients will reach the $5.4 million lifetime exemption limit. But an individual can give up to $14,000 a year to another person without triggering gift taxes, and it’s $28,000 per year for a married couple. What’s better, a special, accelerated five-year gift can be made all at once without triggering gift taxes; that’s $70,000 for an individual and $140,000 for a married couple. If grandparents with, say, seven grandchildren — the average number of grandchildren for most families — donated $140,000 to each grandchild in separate 529 accounts, that adds up to $980,000—funds that can grow for college and may help your clients with their estate considerations. Plus, it’s nearly a million dollars that won’t trigger additional gift tax.

There are intangible benefits too. Not only are you expanding your services for them, but you are also helping your clients with long-term planning, as well as contributing to their loved ones’ future. By helping your clients to invest in the next generation, you are showing how important their legacy is while advising them as they seek to plan for the future. This can also help strengthen your client relationships.

American Funds, a part of the Capital Group, has helped investors pursue their goals since 1931. CollegeAmerica® was launched in 2002 to help investors save for one of their primary goals: to fund a child’s education. Today, CollegeAmerica is the nation’s largest college savings plan by assets under management, serving over one million families. And, we offer flexible, easy-to-use investment options — including target date funds — all managed by experienced investment professionals. According to Morningstar, CollegeAmerica is one of the top advisor-sold 529 college savings plans, and is among the most affordable in the 529 industry.

We have a long-standing commitment to service and support to help you open, offer and service accounts. Please let us know how we can help you better serve your clients as they save for college for their loved ones.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses, summary prospectuses and CollegeAmerica Program Description, which can be obtained from a financial professional and should be read carefully before investing. CollegeAmerica is distributed by American Funds Distributors, Inc. and sold through unaffiliated intermediaries. 

Depending on your state of residence, there may be an in-state plan that provides state tax and other state benefits, such as financial aid, scholarship funds and protection from creditors, not available through CollegeAmerica. 

If withdrawals from 529 plans are used for purposes other than qualified education expenses, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. State tax treatment of K-12 withdrawals varies. Please consult your tax advisor for state-specific details.

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.