Posted by : Amara Chan Thursday, January 9, 2014

An experienced Lamkin Elder Law attorney can help you make important decisions regarding your estate and retirement plans. Whether you are a war veteran or a regular senior, you would want to leave a lasting legacy to your family after your passing. Planning for your elderly years might not be so easy; especially if you have a sizable amount of assets you would like to divide equally among your loved ones.

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It's vital to think about all alternatives when it comes to estates because elders may require long-term care (such as Medicaid) in the future. This requires funding, which might affect the senior's capacity to give anything at all to his heirs when the time has come. For most seniors, grandchildren have a special place in their hearts. However, they often can't decide on the best gift to give them. Will it be money or real estate? A good option nowadays is to invest in the child's education using the 529 Plan.

What Is a 529 Plan?

Named after Section 529 of the Internal Revenue Code, this lets seniors give the gift of education to their grandchildren, while reducing the amount of their taxable estate. This would play an important role when applying for Medicaid later on. Nearly all states honor 529 Plans these days. 

With a 529 Plan, seniors can create accounts to pay for their grandchildren's college education and other expenses. The ones making the account are called 'college savers' or 'account owners', while those receiving the gift are called 'beneficiaries'. 

There are generally two types of 529 Plans which are:

  • Savings Plans. College savers can establish accounts where they choose among investment options to contribute for the college funds. Some of these options include mutual funds, stocks and bonds, as well as portfolios. Withdrawals from a 529 Savings Plan can be used to pay for tuition, board, or lodging in any university.
  • Prepaid Plans. These let college savers pay in part or whole of the tuition fees for a particular college or university. In some cases, Prepaid Plans are used to purchase units, credits, room, and board in selected schools.

Advantages of 529 Plans

If you're thinking about getting 529 Plans for your grandchildren, talk to your financial adviser or to an Elder Law lawyer. They can advise you of the best course of action, and may even recommend you a few people to contact for additional assistance. 

  • 529 Plans are not state-dependent. That means a senior can be in California, set up a 529 Plan in Vermont, and still be able to send his grandchild to college in Texas. However, he would need to check the guidelines of educational institutions for the types of plans they accept.
  • 529 Plans are transferable. If at any time you might not wish to make contributions to your current beneficiary anymore, you can give the plan to someone else - provided he or she is also a member of the original beneficiary's family (like a sibling or a first cousin). 
  • Earnings from 529 Plans are tax-free. As long as these withdrawals are used for college benefits, they are not subject to state income tax. 
Happy Finance Family

The gift of education is definitely a legacy worth leaving behind to the younger generation. Thanks to a 529 Plan, you can rest easy knowing your grandchildren will have a better tomorrow. 

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