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Retire Wise | May 2021

Retire Wise | May 2021

| May 11, 2021

4 Ways 529 Plans Can Benefit Estate Planning

You may be familiar with the role 529 plans play in helping families set aside funds for future education expenses. Established in 1996 under Section 529 of the Internal Revenue Code, these plans are versatile savings accounts that offer tax incentives while minimizing the impact on financial aid. In addition to being one of the most popular education savings programs, 529 plans also offer important estate planning benefits, including:

  1. Significant tax advantages: When used to pay for qualified education expenses, 529 account earnings and withdrawals are free from federal and, in many cases, state taxes. They are also one of the only assets that account owners can remove from their taxable estates while still maintaining control over the assets. That makes 529 accounts a tax-smart option for grandparents seeking to fulfill certain legacy planning goals.  

  2. Maximum flexibility: Offered by most states, 529 plans are typically open to all savers, not just their own state residents. Contributions can also be made by anyone, including a trust and other entities, for any beneficiary. Plan assets can be used to pay for most education expenses, including tuition, room and board, books, computers, and supplies at most colleges, technical, vocational, and graduate schools, or for qualifying adult continuing education programs. Assets can also be used to pay for up to $10,000 per year in K-12 tuition for primary or secondary public, private, and religious schools.1

  3. Low minimum investments: Most states offer very flexible minimum contribution limits, making it easy and affordable to fund accounts for multiple beneficiaries. Many plans require a $250 initial contribution with subsequent contributions of as little as $50.1

  4. High maximum contribution amounts: Since contributions are considered gifts for tax purposes, they qualify under the annual gift tax exclusion, which is $15,000 for individuals ($30,000 for a married couple filing jointly) in 2021.2 Even better—an exception enables 529 account owners to accelerate their gifting schedule by front-loading the plan. That means you can contribute up to five years of gift-tax-exempt funds into the 529 account in a single tax year. For example, the five-year election would allow contributions up to $75,000 per parent or grandparent, or $150,000 for a married couple filing jointly. For each of the five years, you must report the five-year election on IRS Form 709.

To learn more about tax-smart ways to help you pursue your legacy goals, call the office to schedule time to talk.


Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. This information is found in the issuer’s official statement and should be read carefully before investing.

Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state's 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult their financial or tax advisor before investing in any state's 529 Plan.

This information is not intended as specific legal or tax advice.

Thinking About Selling Your Home? Why 2021 May Be the Right Time

Roughly one year ago, the COVID-19 lockdown put the housing market on hold. A few months later, it not only bounced back, but has been booming ever since, thanks to the combination of low interest rates, high demand, and low inventory. In recent months, these conditions have triggered bidding wars in many parts of the country, further driving up home prices.1 In fact, the median selling price for existing homes jumped 17.2%, year-over-year, to $329,100 in March.2 While this may be great news for sellers seeking top dollar, it’s important to weigh the pros and cons of selling now. After all, you will still need someplace to live, which may be harder and more expensive to find in the current market. Below are several considerations if you’re thinking about selling in the months ahead.

Interest rates are expected to remain low: While mortgage rates have recorded modest increases in recent months, they are expected to remain low compared to historical averages. While that’s good if you anticipate buying a new home after selling yours, keep in mind that rising home prices can erode some of the benefits of low mortgage rates. This is especially true in tight markets where buyers may find themselves bidding well above a property’s asking price to secure the home of their choice.

You recently refinanced: When you refinance, you generally want to remain in your home until you recover the closing costs on your new loan, known as your break-even point. However, in certain cases, selling now could lead to greater savings over the long term if the value of your current home has increased substantially and/or you are able to purchase a new home at a significantly lower interest rate. Just keep in mind that closing costs will also apply to your new purchase, so it’s important to run all the numbers to ensure a move makes good financial sense.

You’re concerned about paying too much for your next home: While cashing in on today’s booming market may be tempting, if you’re on the fence, or you and your spouse disagree on when, where or if you should move, it may make sense to wait. A move is a big decision and one you don’t want to regret later. On the other hand, if you’re committed to moving but are concerned about paying too much for your next property, you may want to consider selling now and renting until the current seller’s market cools down.

Don’t forget about taxes: If you've owned your home for at least two years and meet the primary residence rules, you may still owe tax on the profit if it exceeds IRS thresholds. Individuals can exclude up to $250,000 of the gain and married couples filing jointly can exclude up to $500,000.3

For help in determining if this is the right time for you to sell, or to learn about strategies to help offset capital gains, call the office to schedule time to talk.


This information was written by KRW Creative Concepts, a non-affiliate of the broker-dealer.