Articles for Financial Advisors

Gifts and 529 Plans

Gifts and 529 Plans

There are 18 states (plus D.C.) that have an estate tax lower than the federal amount; only Connecticut has a gift tax (for annual gifts > $14,000), according to CCH.


Surprisingly, a gift made to a 529 plan for someone other than your spouse is excluded from the donor’s estate even though the donor can access account principal for his own personal use without penalty or taxation. The donor can also access 529 plan earnings but will incur income taxes and a possible 10% penalty on such growth. What makes this “surprising” is that the donor, who is the custodian of the 529 account, still has constructive receipt, yet the account value is not considered part of the donor’s estate.

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