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The use of 529 plans in estate planning in California

On Behalf of | Feb 2, 2022 | Estate Planning And Litigation |

The use of 529 plans in estate planning is a relatively new development in California, but it has already become quite popular. A 529 plan is a tax-advantaged investment account that you can use to save for college expenses. But what many people don’t realize is that they can use these accounts to help reduce estate taxes and pass on more wealth to their heirs. Here’s what you need to know about using a 529 plan in estate planning.

Why should you use a 529 plan in estate planning?

One of the biggest benefits of using a 529 plan in estate planning is the fact that these accounts offer significant tax savings. For example, contributions to a 529 plan, as well as distributions, are not subject to federal income taxes, and any earnings on the account grow tax-free.

Another benefit is that it provides flexibility. You can use the funds in a 529 plan to pay for any type of qualified higher education expenses and also have the option to change the beneficiary of your account if your child decides not to go to college or if you want to use the funds for another family member.

Tips on getting started on 529 plans

Research different 529 plans to find one that best meets your needs. There are a variety of plans available, so be sure to compare features such as fees, investment options, and withdrawal restrictions.

Contact the plan provider to set up an account. Once you have chosen a plan, you will need to provide some basic information about yourself (or the person for whom you are opening the account), and then you will be ready to start saving.

Using a 529 plan in estate planning can provide a number of benefits for you and your heirs. If you are thinking about using one of these accounts, be sure to do your research and choose a plan that best meets your needs.

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