3 Tax Benefits of Education Trusts
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TrustCounsel’s Gregory Herman-Giddens will present ‘Education Trusts and 529 Plans: Estate Planning Strategies for College Savings’ On September 5th in a 60-minute teleconference through the National Constitution Center. These estate planning tools often require specialized structures and advisors need to be able to recognize the right plan for an individual from the variety of options that exist. Continuing Legal Education Credit available. Register for the event here.
Anchor College Savings Plans (529 Plans), alone or combined with education trusts, are powerful ways for families to pay for college expenses. Some families only have a general savings account for education expenses and they miss out on the benefits of College Savings Plans that allow greater growth, tax-free distributions for various qualified expenses, and several tax advantages. College Savings Plans tax benefits may include:
Tax deferral. Contributions grow tax-free. Taxes are only imposed on withdrawals that do not meet qualified expenses. Withdrawals made for college expenses are completely tax-free.
Tax deductions. There are contribution limits your estate planning attorney can review with you; however, annual gift tax deductions allow contributors to add funds to 529 Plans while at the same time reducing their taxable estate. Some states also allow an income tax deduction. North Carolina allows income tax deductions for contributions made to NC’s College Savings Program.
Tax flexibility. Anyone can establish a 529 Plan. Parents or guardians of the future college student are not the only ones who can enjoy the tax advantages.
Although 529 Plans are fairly simple to establish and use, there is the potential for error. For example, if a college student receives a scholarship they may be responsible for taxes if 529 Plan withdrawals exceed the value of the scholarship. Consult with an attorney to make sure you know all of the applicable tax rules for 529 Plans. In addition to the benefits above, there are smart ways of gifting for college in North Carolina that our estate planning lawyers in Chapel Hill review at the link.
