When we contribute money to a 529 College Savings plan for a friend or relative, we are giving them a gift. According to the current tax laws, we can give up to $13,000.00 to any number of individuals each year and the gift will not be subject to gift tax.
A special tax law for 529 accounts actually allows an individual to make a one-time gift of up to $65,000.00 to a 529 College Savings plan for one individual. The gift is treated from a tax standpoint as annual gifts of $13,000.00 for the five years following the gift to the plan. For example if an uncle put $65,000.00 in a plan for his niece in 2010, any additional gifts he gives her through 2015 would be subject to gift tax because it would be over the annual $13,000.00 gift tax exemption.
529 Savings Plans are a great way to give money that will grow to pay for college expenses in the future. Another great way to give to loved ones while taking advantage of tax benefits is to make payments for tuition and medical expenses directly to the education or medical institution. Payments made directly to medical facilities and schools are not treated as gifts and are typically not subject to gift taxes.
Getting Legal Help
Giving is an important piece of estate planning. Experienced Estate Planning Attorney Elga Goodman can help you prepare an estate plan which protects your assets and your loved ones. Call us today at 973-841-5111.