Estate Planning

Creating a Lasting Legacy for Your Loved Ones
A 529 college savings plan isn’t only for parents!  Family members – whether they are grandparents, aunts, or uncles – can open a 529 plan to help fund a child's future higher education AND enjoy important benefits.

Remain in control

Assets in your 529 account are excluded from your federal taxable estate but you maintain complete control over them. This is one of the most unique 529 plan features. If an unforeseen need or opportunity arises, you can access your account – at any time, for any reason! (Taxes on earnings and a 10 % federal tax penalty might apply.) Custodial accounts and trusts don’t have this flexibility. The beneficiary never gains ownership – at any age. Control also means that you can change the beneficiary; the only restriction is that the new beneficiary must be a “family member” of the old beneficiary. You may voluntarily give up control by transferring ownership of the account to any other person.

Estate planning benefits through accelerated gifting*

A special federal gift tax exclusion allows you to contribute a large sum in a single year. The IRS code allows for a five-year acceleration of the annual federal gift tax exclusion. That means that you can contribute up to $70,000 per taxpayer ($140,000 for married couples) per beneficiary in one year without incurring federal estate tax consequences. To take advantage of this opportunity, you simply elect to prorate a contribution of more than $14,000 evenly over five years on the appropriate IRS form (709). Of course, you can contribute any amount at any time, up to the maximum allowable account value ($368,600) subject to the normal federal gift tax rules.

Enjoy unique tax advantages**

• The entire value of your account is exempt from Pennsylvania inheritance tax. Depending on whom your heirs are, that could be a savings of up to 15 percent of the assets.
• Contributions of up to $14,000 per beneficiary per taxpayer are deductible from your Pennsylvania taxable income. For married couples filing jointly, $28,000 per beneficiary may be deducted if each spouse has taxable income of at least the amount deducted. There is no limit on the number of beneficiaries’ accounts to which you can contribute.
• Earnings on your contributions are federal and state income tax free. You pay no state or federal income tax while the contributions in your account are growing. And, when used for qualified higher education expenses, you pay no federal or state income tax even when you make a withdrawal.
• You can take advantage of these great federal and state tax benefits no matter what your income is.

High account maximum

You can build a college savings account of up to $368,600 for each of your beneficiaries. $368,600 is the current cost for undergraduate and some, if not all, graduate schools for some of the nation’s most expensive schools. So you can be confident about fully funding college for those you care about!

*In the event the donor does not survive the five-year period, a pro-rated amount will revert to the donor's taxable estate.

**The availability of tax or other benefits may be contingent on meeting other requirements. A withdrawal or a portion of a withdrawal not used to pay for qualified expenses may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes.