• Estate Planning
  • Elder Law
  • Business Law
Contact Us Today! 270-212-3669
K.T. Williams Law
  • Welcome
  • About
    • Our Practice
    • K.T. Williams
  • Services
    • Estate Planning
    • Elder Law
    • Business Law
  • Articles
  • Facebook
  • Contact
  • Menu Menu
  • Facebook
  • Mail
What-is-a-529-Savings-Plan?

What is a 529 Savings Plan?

October 27, 2020/in Uncategorized/by KT Williams

Did you know that a 529 savings plan is a tax-advantaged investment vehicle designed to encourage saving for the future higher education expenses of a designated beneficiary? There are generally two broad categories of 529 plans: college savings plans and prepaid tuition plans.

Nearly every state has at least one 529 plan available, but you can invest in a 529 plan in almost any state. Be sure to research the options available to find the best fit for you. A 529 plan operates much like a Roth IRA. The contributions are after-tax, and it grows tax-free. Distributions for qualified expenses are not taxed. Qualified expenses include tuition, as well as books, room and board, and even computers. It can be spent on K-12 tuition, graduate or professional school, or even continuing education. Additionally, over 30 states offer full or partial tax deductions on state income tax for 529 plan contributions.

There are no annual contribution limits, and the lifetime contribution limits, which vary by plan, range from $235,000 to $520,000. There are no age or time limits, so they can continue to grow indefinitely, and they can be transferred to another qualifying family member easily. The owner, who contributes the money, maintains control of the account, rather than the beneficiary, so you can make sure that it is used for its intended purpose.

The value of the 529 plan can impact the student’s financial aid. This impacts both the federal aid, as well as, financial aid from universities and colleges directly. Another potential drawback is the 10% withdrawal penalty for non-qualified distributions. This penalty can be waived under certain circumstances, including:

  • A beneficiary dies or becomes disabled
  • A beneficiary receives a tax-free scholarship
  • A beneficiary receives educational assistance through a qualifying employer program
  • A beneficiary attends a U.S. Military Academy
  • The qualified education expenses were used to generate the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Tax Credit (LLTC)

These distributions are also taxable as income, both federally and sometimes at the state level as well. 

To learn more about 529 savings plans and the potential benefits they can bring to your estate plan, please use our office as a resource. We are here to provide you with the answers you need and help you throughout the estate planning process. Contact us today to set up an appointment.

Share this entry
  • Share on Facebook
  • Share on Twitter
  • Share on WhatsApp
  • Share on Pinterest
  • Share on LinkedIn
  • Share on Tumblr
  • Share on Vk
  • Share on Reddit
  • Share by Mail
https://ktwilliamslaw.com/wp-content/uploads/2020/10/P42.Williams.Blog_.Oct_.2.png 450 800 KT Williams https://ktwilliamslaw.com/wp-content/uploads/2015/12/williams-law-logo-rgb-640px.png KT Williams2020-10-27 11:29:222020-10-26 12:10:09What is a 529 Savings Plan?

Archive

  • March 2021
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • May 2019
  • April 2019
  • March 2019

Categories

  • Asset Preservation
  • Business
  • Caregivers
  • Estate Administration
  • Estate Planning
  • Health Care Planning
  • Long Term Care Insurance
  • Medicaid
  • Retirement
  • Uncategorized
  • Veterans

K.T. Williams Law PLLC

226 B North Elm Street
P.O. Box 561
Henderson, KY 42419-0561
270-212-3669

Office Hours

Monday – Thursday: 8:00-5:00
Friday: 8:00-4:00
Saturday & Sunday: Closed

Follow us on Facebook

This website is an advertisement, not advice or instructions, and it does not create an attorney-client relationship. 
Do not take action based on anything seen here without consulting an attorney.

Copyright © 2023 – K.T. WILLIAMS LAW – Henderson, KY Law Office – [ website by VisualRush ]

Estate Planning Awareness Week Takes on More Significance than Ever During ...estate-planning-awareness-week-takes-on-more-significance-than-ever-during-covid-19Tax ChangesAre Major Tax Changes Ahead?
Scroll to top