Estate and Gift Tax Information

The federal gift tax election allows your clients to contribute up to $14,000 per person or $28,000 per couple, per beneficiary, in a single year without incurring any federal gift tax penalty.

Accelerated Gift Option: Contributions over these “limits” in a single year can be prorated over 5 years without incurring federal gift tax or reducing the unified estate and gift tax credit.¹

For Example: Grandma and Grandpa Davis make a $120,000 lump-sum contribution to their granddaughter’s 529 account this year. Under the accelerated gifting option they are considered to have made annual gifts of $24,000 (as a couple) for the period 2010-2014. Because the annual amount is less than the annual gift tax exclusion, they don’t owe any gift taxes.

They can then repeat the same structure in 2015 for another 5 years.

Additionally, contributions to 529 savings accounts are generally considered completed gifts, and therefore excluded from taxable estates. We recommend that you consult with a tax advisor for advice based on your client’s own particular circumstances.

Maximum account balance information

Accounts can continue to receive contributions until the account balance reaches $280,000 per beneficiary. If the account balance falls below that mark, contributions will be accepted until the balance again reaches the $350,000 mark.
Earnings on the account can exceed this amount, but contributions cannot.²

Eligible expenses

Savings can be used nationwide for eligible college and vocational/trade schools to pay for qualified expenses such as tuition, required fees, certain room and board expenses, and required supplies.

Change in beneficiaries

If a beneficiary does not use any/all of the savings, the account holder can change the beneficiary at anytime. If the beneficiary is a member of the family of the current beneficiary, there is no penalty or adverse income tax consequences resulting from such change.

 ¹ Contributions between $14,000 and $70,000 made in one year can be prorated over a five-year period without incurring federal gift taxes or reducing your unified estate and gift tax credit. If the contributor dies before the end of the five-year period, a prorated portion of the contribution will be included in his or her taxable estate. If they contribute less than the $70,000 maximum, additional contributions can be made without incurring federal gift taxes, up to a prorated level of $14,000 per year. Federal gift taxation may result if a contribution exceeds the available annual gift tax exclusion amount remaining for a given student in the year of contribution.

 ² The combined maximum account balance limit for all 529 plans established and maintained by the State of Colorado for a particular beneficiary cannot exceed $280,000. Although account balances can grow beyond that amount, no additional contributions can be made once the balance reaches $350,000.

Important Considerations

To learn about CollegeInvest’s 529 program, its objectives, risks, charges, expenses, limitations, restrictions and qualifications regarding the Plans’ benefits and potential tax advantages, please read and consider carefully the Program Disclosure Statements (PDS) available at www.collegeinvest.org before investing. Also, check with your or your beneficiary’s home state to learn if it offers tax or other benefits for investing in its own plan. Administered and issued by CollegeInvest.

CollegeInvest and the CollegeInvest logo are registered trademarks of CollegeInvest.