Some residents of Austin, Texas may feel that the estate planning process is confusing. There are many avenues to take, including a variety of trusts. It can be difficult to discern how to choose the best path as each choice is based on the grantor’s specific circumstances.
It is never too early to develop an estate planning strategy, especially for those who may wish to put aside funding for their children’s or grandchildren’s college tuition. A 529 college savings plan can be an effective tool as well as an important part of the estate planning process particularly for those who are looking to help fund their children’s or grandchildren’s college educations. Unlike irrevocable trusts, grantors can change the beneficiaries as desired without giving up control. This is extremely important if personal circumstances change, such as the grantors’ or beneficiaries’ economic needs.
Also, there are important tax benefits as far as 529 college savings plans are concerned. The IRS allows for lump-sum contributions as well as the acceleration of contributions over a 5-year-period. If the grantor passes away prior to the end of the 5-year-period, part of the gifted amount can be included in the grantor’s estate. However, those who open 529 college savings plans must be careful not to overfund those accounts because amounts withdrawn that are not considered part of college education payments are subject to a 10% penalty over the beneficiary’s current tax rate.
It is important to think of estate planning as a puzzle with the 529 savings plan serving as a small piece. Planning a legacy for loved ones is the main reason why people choose to formulate a plan for who will inherit their assets after death. An experienced attorney can explain the different components of an estate plan and make recommendations as to what steps are needed to develop a strong individual strategy. A seasoned lawyer may also be able to review existing estate plans and make recommendations for possible changes.