529 Savings Plan

By Wendy Irvine

Ready to burst with excitement that your baby is about to have a baby? This momentous occasion calls for a special gift; but before you snap up that adorable crib, think bigger. Way bigger.

Think 529…and we’re not talking blue jeans. A 529 (named after Section 529 of the Internal Revenue Code) is a college-only savings vehicle that can dramatically impact your grandchild’s future.

How? Grandparents can open a 529 for their grandchild and invest in the 529 up to $12,000 a year per grandparent, with the recipient incurring no gift tax. (Further, although the feds don’t let grand donors deduct the gift, many state income tax regulations do ; check your state tax board for details.)

Suppose at your grandchild’s birth you open a 529 with $2,000 and add $2,000 each year- contributing a total of $36,000 over 18 years. Big deal, right? But at a 10 percent growth rate, that $2,000 a year blossoms into about $114,500 by the time your grandchild is college bound.

Like a well-tended seed, your grandchild’s 529 will flourish, thriving not on sun or water but on the beauty of time

And there’s one last gorgeous “benny”: Once it’s cracked open, 529 funds are entirely tax free.

For a user-friendly guide, visit www.savingforcollege.comto learn how to create a gift that is almost as spectacular as that new baby you just can’t put down.
Courtesy of July-August issue of Grand, “Practical: 529 Savings Plan” by Wendy Irvine.
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