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Stretching 529 Plans

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  • Stretching 529 Plans

    I haven't see this a good article analyzing this topic, so I wanted to put it forward in this forum.

    I am looking for a pro/con analysis for the idea of over-funding your children's 529 plan, with the intention of using leftover funds for the (not-yet-born) grandchildren in the future. The intention is to use the funds for educational purposes only (and not as a hack for retirement), but to get extra years of tax-free compounding for the educational expenses of the next generation.

    The traditional approach is to set up 529 plans for your grandchildren when they are born. But if we can afford to put that money now in our Children's 529 plans, would this be a good strategy to employ?

  • #2
    What if you don't have grandchildren?

    What if none of your grandchildren need money for education?


    If you are already FI or getting close and want to put more into 529 then you will likely need over funding taxable that you would also not likely need then it might be worth it. Especially if you can get a state tax break.

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    • #3
      Yes.

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      • #4
        Yes. What do you think bezos and gates are doing?

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        • #5




          I haven’t see this a good article analyzing this topic, so I wanted to put it forward in this forum.

          I am looking for a pro/con analysis for the idea of over-funding your children’s 529 plan, with the intention of using leftover funds for the (not-yet-born) grandchildren in the future. The intention is to use the funds for educational purposes only (and not as a hack for retirement), but to get extra years of tax-free compounding for the educational expenses of the next generation.
          Click to expand...


          I don't know if there are any "good" articles on the topic, but it has been mentioned a gazillion times on this forum.


          \would this be a good strategy to employ?
          Click to expand...


          Sure, assuming everything else is squared away.

          Of course, the best thing to give your grandkids (aside from your grandparenting) would be a RIRA.  At least until they change the rules.

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          • #6
            There are some considerations to be aware of when considering funding 529 accounts for future generations.

            If you make the extra contributions to you or your spouse's 529 account. This will increase the amount included in the parental assets for FAFSA and CSS PROFILE assessments for financial aid. This probably is not a consideration if you have enough assets to be doing this in the first place.

            A change in/rollover to a beneficiary in a lower generation than the current beneficiary is considered a new completed gift. The change/rollover is subject to gift tax reporting. The rollover would be the better option.

            This would allow rollovers 5X the annual exclusion (double for a couple) every five years without any reduction in the lifetime gift/estate exclusion. Currently this would allow up to $750K* in rollovers from birth -> college age for each grandchild.

            *Not including CPI adjustments to the annual exclusion limit.

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