Gifts that do some good
Making contributions in order to save for your grandchildren's education is a great way to help them achieve their dreams.
A big contribution can make a big difference
If you're ready to kick in to a college fund, check with your child to see if your grandchild has a 529 education savings plan. If one hasn't been opened yet, talk to your child about starting one, or surprise her by opening an account with your financial professional.
It's good to know:
- CollegeAmerica® 529 savings plans have no income restrictions.
- Each taxpayer can contribute up to $16,000 annually per child ($32,000 for married couples) without gift tax consequences.
- Under a special election, you can contribute up to five years at once (up to $80,000, or $160,000 for a couple) without it counting against the lifetime gift tax. No additional gifts can be made to that beneficiary over the next four years after the year in which the one-time gift is made. If the donor of an accelerated gift dies within the five-year period, a portion of the transferred amount will be included in the donor’s estate for tax purposes. Consult with a tax professional regarding your specific situation.
Not only are there tax benefits to a 529 savings plan, but more importantly, the money contributed early on can continue to grow, helping your child and grandchild with future costs for education. Tax-advantaged treatment applies to savings used for qualified education expenses. State tax treatment varies.
Smaller contributions make a big difference too!
If making a sizable lump-sum contribution isn't realistic for you, consider making smaller, regular contributions every year. As the interactive calculator below shows, these gifts really add up.
Take care of you first
Your heart is in the right place, but don’t fund their future at the expense of your own. Make sure you’re meeting your retirement goals too. If committing to an ongoing contribution to a 529 savings plan is too much for your budget, consider annual gifts on birthdays or holidays when you can. Every little bit helps. What you contribute today might cover books, and if allowed to grow over time, it could cover part of tuition for a semester.
