Often, those grandparents that are able want to make gifts to grandchildren but two issues get in the way:
Here’s how to overcome both limitations—it’s called the 529 plan. Straight from section 529 of the IRS code, it allows you to make 5 years of gifts in one year for deposit into a 529 college funding plan. Rather than $10,000 per year, you can gift $50,000 in one year. If you are married, your spouse can do the same $50,000 gift for a combined total of $100,000 to each grandchild in one year.
Normally, when you make a gift, you no longer have control or access to the funds. With 529 plans, you have both. The asset is legally out of your estate but you control the account. The funds must be used for educational purposes. If your grandchild does not go to college, the account could be then used for their children.
If you decide you need the money back, you can close the account, pay a 10% penalty on earnings, and take back the account balance for your own use. The other benefit is that all taxes are deferred while the account is growing.
Want to know more? Just check off on the coupon and we can supply further details and information on 529 college funding programs.