Tools & resources
Gifts to 529 plans can help families save for college with the potential to also reduce estate taxes. 529 plans allow five years of gift contributions, to be combined in one year.
529 plan gifts and any potential gains are removed from the contributors taxable estate, but they retain control over the account.1,2
| Contributor | Gift Tax Exemption Limit for 20253 Per Beneficiary |
Five Year Accelerated Gift3 Per Beneficiary |
|---|---|---|
| Individual | $19,000 | $95,000 |
| Married | $38,000 | $190,000 |
Resources for your client discussions:
- Tax benefits are conditioned on meeting certain requirements. Federal income tax, a 10% federal tax penalty and state income tax and penalties apply to non-qualified withdrawals of earnings. Generation-skipping tax may apply to substantial transfers to a beneficiary at least two generations below the contributor. Gift examples are general; individual financial circumstances and state laws vary – please consult a tax professional before investing. If the contributor dies within the five-year period, a prorated portion of contributions may be included in their taxable estate. See the Program Description for more complete information.
- Because contributions to 529 plans are generally considered completed gifts for federal gift, estate, and generation-skipping transfer tax purposes they qualify, for the annual exclusion from gift taxes. In addition, you may contribute up five times the annual gift limit per beneficiary and treat it as if it were given over a five-year period, free of gift tax, so long as no other contributions are made to the same beneficiary in that five-year period.
- Source: IRS. Accelerated gifting is a special provision of 529 plans that permits a contributor to combine five years of contributions (the current year plus four future years) in a single year. However, no additional gifts may be made until five years have passed.
All investments involve risk including possible loss of principal.
Investors should carefully consider the 529 plan’s investment goals, risks, charges and expenses before investing. To obtain the Program Description, which contains this and other information, talk to your financial professional or call Franklin Distributors, LLC, the manager and underwriter for the 529 plan at (800) DIAL BEN/342-5236 or visit franklintempleton.com. You should read the Program Description carefully before investing and consider whether your, or the beneficiary’s, home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in its qualified tuition program.
Franklin Templeton’s 529 College Savings Plan is offered and administered by the New Jersey Higher Education Student Assistance Authority (HESAA); managed and distributed by Franklin Distributors, LLC, an affiliate of Franklin Resources, Inc.,
which operates as Franklin Templeton.
Investments in Franklin Templeton’s 529 College Savings Plan are not insured by the FDIC or any other government agency and are not deposits or other obligations of any depository institution. Investments are not guaranteed by the State of New Jersey, Franklin Templeton, or its affiliates and are subject to risks, including loss of principal amount invested. Investing in the plan does not guarantee admission to any particular primary, secondary school or college, or sufficient funds for primary, secondary school or college.
This material is being provided for general informational and educational purposes and should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel and provided for educational and informational purposes only. Franklin Templeton does not provide legal or tax advice. Federal and state laws and regulations are complex and subject to change, which can materially impact your results. Franklin Templeton cannot guarantee that such information is accurate, complete or timely; and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.