From 24/7 Wall St. · Vilma Rios · · 1m 20s
Grandparents Use 529 Plans as Tax Shelter
Grandparents shift $570,000 to grandkids' 529 plans to avoid estate tax.
In brief
Grandparents shift $570,000 to grandkids' 529 plans to avoid estate tax. Grandparents can move $570,000 into 529 plans for grandkids without triggering federal estate tax. Originally reported by 24/7 Wall St..
529 Plans Tax Benefit
The tax code rewards grandparents who give college money early and quietly lets them keep control of every dollar they hand over.
Five-Year Election
Section 529(c)(2)(B) lets grandparents spread gifts over five years to avoid using their lifetime gift tax exemption.
Super-Funding Example
One grandparent can put $95,000 per grandchild without using their lifetime gift tax exemption in 2026.
Estate Tax Avoidance
A couple can move $570,000 into 529 plans for three grandchildren, avoiding $408,313 in federal estate tax.
Grandparent Control
Grandparents can change beneficiaries or take money back without tax consequences.
Roth IRA Option
After 15 years, beneficiaries can roll up to $35,000 per year into a Roth IRA.
Dying Within Five Years
If a grandparent dies before the five-year period ends, the gift reverts to their taxable estate.
Who Benefits
Households headed by people 70 and older control 33.6% of U.S. household net worth and use 529 plans for tax benefits.
Moves to Make
Fund by year-end, file the election by April 15, 2027, and name a replacement owner to avoid tax issues.
What it means
Grandparents can move $570,000 into 529 plans for grandkids without triggering federal estate tax.
