Using 529 Plans for Retirement and Estate Planning

By Jonathan Sparling

June 18, 2024
5 min read

Last updated on June 5, 2026

529 Benefits

529 Plans

Article

Save For College

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Key Takeaways

529-to-Roth IRA rollover expands use: Under SECURE 2.0, unused 529 funds may be rolled into a Roth IRA for the beneficiary, subject to contribution limits and holding-period requirements.
Estate planning benefits apply: 529 plans can be an effective estate-planning tool because contributions are generally excluded from the account owner’s taxable estate, while still allowing the owner to maintain control of the assets.
Gift tax advantages help reduce liability: Annual 529 contributions qualify for the federal gift tax exclusion, helping reduce a taxable estate without triggering additional taxes.
Superfunding increases transfer power: Account owners can front-load up to five years of contributions, creating a more efficient way to transfer wealth.

529 plans are the gold standard of college savings plans. In addition to helping families save for education, 529 plans can also play a role in retirement and estate planning, especially following recent legislative changes that expanded their benefits. In this article, we examine how 529 plans can be used beyond college savings.

Retirement Planning: The New Roth IRA Provision

With the passage of SECURE 2.0, 529 account owners can now roll over a portion of funds into a Roth IRA. This change is a fantastic way for parents and grandparents to ensure that unused 529 funds continue to help their beneficiary into the future.

There are some rules and restrictions to keep in mind:

How much you can roll over is restricted to the annual Roth IRA contributions limits.
The lifetime rollover amount is capped at $35,000 per beneficiary.
The 529 plan must have been in the beneficiary’s name for at least 15 years.
Any 529 contributions eligible for a rollover must have been invested for a minimum of five years.

(Burtka, 2026)

Keep reading: Added Flexibility: 529-to-Roth IRA Rollovers

Estate Planning: Reducing Estate Tax Liability

It’s no secret that 529 plans can help with estate planning. But before we explain how, let’s define a few key terms.

Federal estate tax is imposed on the transfer of property after someone dies and comes out of the estate. The gross estate could include cash, real estate, trusts and annuities. As of 2026, the federal estate tax applies to estates valued at $15 million or more for individuals and $30 million or more for married couples filing jointly (IRS, 2025).

State estate tax also applies to the transfer of property and is levied by 12 states and the District of Columbia. The tax rate varies between each state.

Finally, there’s state inheritance tax, which is the responsibility of the person receiving property from an estate. Only a handful of states impose an inheritance tax, and the tax rate varies depending on the inheritor’s relationship to the estate holder.

Unlike bank accounts and personal investments, which are generally included in a person’s taxable estate, funds held in a 529 plan are excluded from the account owner’s estate. The account owner still maintains control of the assets, including how they are invested and who is named as the beneficiary. By placing funds in one or multiple 529 plans, someone could reduce the value of their estate to help avoid estate tax.

For the 13 states that levy an estate tax, exemption amounts are much lower than the federal exemption, as low as $1 million in some states (Burtka, 2026). However, most states follow federal estate tax guidelines, including the exclusion of 529 plan contributions from the gross estate. Still, it’s important to check your own state’s rules.

Finally, a handful of states impose an added inheritance tax, which could mean an additional tax at the state level for estates valued over a certain amount. Again, you will want to check your state’s guidelines to see if they impose an inheritance tax and if 529 contributions are excluded.

The Importance of Annual Contributions

According to attorney Jeff Burtka in his article 529 Plans for Estate Planning and Retirement, “The federal estate tax is technically an estate-tax-and-gift-tax, meaning that both your property at death and the gifts you made over your lifetime count toward the exemption amount.”

As of 2026, the annual gift tax exemption amount is $19,000 per recipient for individuals or $38,000 for married couples filing jointly (IRS, 2026). Anything gifted over that amount in a tax year is added to your taxable estate and counted along with any other assets when determining estate tax liability. Again, 529 plans are essential here.

Annual contributions to 529 plans qualify for the annual gift tax exemption. If someone wants to reduce their taxable estate, they can gift up to $19,000 per year per beneficiary to a 529 plan, reducing their taxable estate by that total amount while retaining control of the funds.

In addition to the annual gift tax exclusion, 529 plans qualify for a special “superfunding” provision that allows account owners to front-load up to five years’ worth of contributions at once. Currently, that amount is $95,000 for individuals and $190,000 for married couples (Saving for College, 2026). Superfunding applies to each beneficiary and can be a smart strategy for someone looking to significantly reduce their taxable estate.