GIFTS & CONTRIBUTIONS
Gift outside the box
A gift can be so much more than what fits in a box. 529 contributions are financial gifts toward a child’s future. They help a child afford a college education and grow their options in schools. Plus, whatever gets saved now will reduce student loans and debt later. Since anyone can open a 529 account or contribute, it’s a flexible gift option year-round.
Inviting family and friends to give
Nearly all 529 plans include electronic gifting. This feature allows account owners to set up a gifting event — for any occasion — and send recipients an invitation with instructions on how to contribute to the account. Some plans, like Private College 529 Plan, also provide social sharing links so you can send your invitation through text and email with a more customized message.
While birthdays and holidays are obvious choices for gifting events, there are plenty of other times to include family and friends. For instance, these school-related milestones are perfect for 529 gifting:
- The beginning of a new school year
- The 100th day of school, typically in February or March
- Graduating from pre-K, lower grade school or middle school
- Acing a big exam or scoring high on statewide testing
- Making a sports team or cheer squad
There’s no shortage of reasons to give and milestones to celebrate with a 529. You can even create a single event that stays open for years. Loved ones will appreciate the usefulness of the gift and being asked to contribute. It’s also a great addition to the toys and games kids love to receive.
If you open an account with Private College 529 Plan, you’re able to use e-gifting as soon as the enrollment process is completed. And that’s great news since there’s always a holiday or celebration around the corner.
Opening an account as your gift
Some family members take gifting one step further and open their own account. Since a child can be the beneficiary on several accounts under the same plan, there’s plenty of room for this kind of generosity.
We often see grandparents become account owners, and thanks to the FAFSA Simplification Act, there’s even more reason to open a 529 for the grandkids.
In prior years, 529 assets owned by grandparents (or anyone other than a parent) were counted as untaxed student income on the FAFSA form. But starting with the 2024-2025 academic year, these distributions will no longer count against students and impact financial aid eligibility. *
Additional benefits for grandparents and other savers include:
- A 529 account is a great tool for estate planning. Contributions are considered completed gifts, so they’re exempt from federal estate tax, but you still retain control of the assets.
- 529 contributions are excluded from federal gift tax up to a certain amount annually. In 2023, you can contribute up to $17,000 without having to file a gift tax return with the IRS, and if you’re married, you and your spouse can give up to $34,000. **
- You can superfund a 529 account once, up to five times the annual gift tax exclusion amount, without impacting your lifetime gift tax exemption. This means you can contribute up to $85,000 ($17,000 x 5) in 2023, or $170,000 as a married couple filing jointly.
- And with a prepaid plan like Private College 529, you can minimize investment risk while saving for college.
*This FAFSA change does not impact how 529 assets are reported on the CSS Profile, a second financial aid form used by many colleges.
**The annual gift tax exclusion amount includes all gifts given to a person in a year, not just 529 contributions.