New York Estate Planning & Elder Law Blog
A large number of people in New York are curious about 529 college plans as the result of campaigns run by the state. Not only do 529 college plans provide tax advantages, they are also particularly helpful when estate planning is involved. Despite the benefit of 529 college plans, there are still a number of questions that people have about these plans. This article focuses on addressing some of the most commonly raised of these issues.
What Is a 529 Plan?
These accounts are named after Section 529 of the Internal Revenue Code, which allows individuals to reduce their taxable estate while preserving funds for higher education. Funds that are placed in 529 accounts are usually invested in mutual funds and the earnings from these accounts are most often tax-free.
Where Can a Beneficiary Use a 529 Plan?
According to the Internal Revenue Service, these funds can be used at any eligible educational institute, which is defined as any college, university, or other similar educational institution that is eligible to participate in a student aid program that is administered by the United States Department of Education. As a result, if the Department of Education has provided a school with a federal school code, that institute will be considered eligible for Section 529.
How Can the Funds Be Used?
Contrary to what some people believe, 529 plans can be used for a number of different things beside tuition. Some of the other ways that these funds can be used include certain types of room board and expenses, books, school fees, and supplies required for attendance and enrollment.
Fees Associated with 529 Plans
The only expense charged 529 plans is a total annual fee of .16% of the assets that are placed within account. This means that for every $1,000 that is invested into the plan, a person will be required to pay $1.60 in fees each year. 529 plans do not charge any advisor fees or sales commissions, which is common in many other types of investment plans.
What are the Tax Advantages of a 529 Plan?
Taxpayers in New York are able to deduct up to $5,000 as single payers and $10,000 for married couple filings to New York Direct Plan accounts from each year’s amount of taxable income. It is important to understand that in some situations these plans can be subject to rollovers as well as non qualified withdrawals.
The Maximum Amount that Can Be Contributed to 529 Plans
A person is able to contribute for a beneficiary until the total balance of all New York Direct Plans for the beneficiary reach $375,000. If more than one account was opened for a beneficiary, the total of each account must total no more than $375,000. After the limit is reached, no additional contributions can be made.
Speak with an Experienced Estate Planning Lawyer
Even though some people think that 529 plans are only for wealth individuals, there are a number of advantages offered to all individuals by these plans. If you are interested in using one of these estate plans, you should not hesitate to speak with an experienced estate planning attorney. Contact Ettinger Law Firm today to schedule a free case evaluation.