Understanding 529 Plans Answers To Your College Savings Plan Questions
Below are some answers to frequently asked questions. For help with your specific goals, consult your WoodmenLife Financial Representative and your tax and estate advisors1.
Frequently Asked Questions
529 College Savings Plans are widely regarded as one of the top ways to invest for a future college education. With so many choices available in 529 College Savings Plans, and so many differences among plans, you’re likely to have questions about how specific features relate to your situation.
You can contribute up to $18,000 (or $36,000 if you and your spouse give and file jointly) to a 529 plan each year without owing federal gift taxes, provided you haven’t made other financial gifts to the plan beneficiary in the same year. In addition, you can elect to make a lump-sum contribution of up to $90,000 ($180,000 for married couples filing jointly) in the first year of a five-year period, provided you don’t give the beneficiary additional taxable gifts during the five-year period2.
It depends on the state you reside in. Plan contributions to that state’s 529 plan may be eligible for state tax deductions. Check with your WoodmenLife Registered Representative or tax advisor3.
A 529 plan offers the owner control over the plan, including flexibility in naming and changing the beneficiary.
The beneficiary can be any age and generally can be changed to a qualified relative when needed.
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529 College Savings Plan Advantages
Paying for a child’s or grandchild’s college education is an expensive proposition, even for families that have saved diligently in pursuit of their goal.
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Disclosures
WoodmenLife, its employees and Representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.
If you die before the end of the five-year period, a prorated portion of the contribution will be considered part of your taxable estate.
By investing in a 529 plan outside of your state of residence, you may lose any state tax benefits. Non-qualified withdrawals are subject to federal and state income tax and a 10% penalty. 529 plans are subject to enrollment, maintenance, management fees and expenses. Contact your tax advisor for details.
If you use a 529 savings plan for K-12 tuition, withdrawals may not be tax-free and there is a potential of recapture of state income tax breaks which depends on your state of residence.
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