If you or a loved one plans on contributing money to the education of a child or grandchild, a qualified state tuition plan is an excellent idea to make the most out of your contribution. Each state has certain plans that address how you can tackle contributions including savings plans and prepaid tuition plans.

The Role of Section 529

Saving plans involve tax-sheltered contribution techniques which are permitted under the Internal Revenue Code’s Section 529. These plans receive favorable income tax treatment provided withdrawals are used for permissible reasons. Another attractive feature of 529 plans is that they combine five years of annual exclusion gifts to one year. This ability lets the person who creates the 529 plan give minors an early and significant start toward paying for college. 

The contributions to 529 plans must be made in cash. If you select an option to make five years of annual exclusion gifts, you will not be able to make other types of contributions to the plan or any other annual exclusion gifts until another four years have passed. 

Oklahoma is just one of many states that permit investors to utilize 529 plans. The Internal Revenue Service also now permits the donor to change investment strategies up to once a year. 

Common Details about 529 Plans

529 plans are designed to help pay for higher education expenses. Some of the most basic details about 529 plans that you should understand include: 

  • Anyone can open a 529 plan, including parents and grandparents. This individual, however, must be a United States citizen or a resident alien. 
  • There are 529 plan options for even beginning investors. The choices that you ultimately select will depend on how comfortable you are with investing risks as well as when you expect the student will need the assets.
  • Beneficiaries are future students or individuals for whom accounts are opened. A person can open an account for a child, grandchild, or a loved one. 
  • If a beneficiary decides not to pursue an education, you can stay invested in case that individual decides to later attend school given that there is no age limit on which the money must be used. 
  • 529 plans vary in countless ways including 529 plans that require fees to open and maintain an account, in-state tax treatments including 529 tax deductions, investment options, and plan managers. Some other differences might exist including special programs or benefits as defined by the particular plan. 
  • You might transfer ownership of a 529 plan at any time. Assignments of this kind transfer all rights, title, and interest in accounts to other owners. Following a transfer, a person no longer has access to or control of an account. 

Speak With an Experienced Estate Planning Attorney

Various methods exist to achieve your estate planning goals. The best first step is to speak with a knowledgeable lawyer. Contact attorney Jim A Lyon today to schedule a free case evaluation.