Long Island Elder Law & Estate Planning

If you have a younger heir on your inheritance list that has not yet attended college you may want to consider starting a 529 college savings plan for the benefit of this individual. Anyone could consider doing this, but it has particular value for those who have assets that exceed the estate tax exclusion amount.

At the present time the estate tax exclusion sits at $5.25 million. Anything above this is potentially subject to a federal estate tax that tops out at 40%.

You could give gifts to your heirs while you are still alive, but there is a gift tax that is unified with the estate tax. As a result, any gifts that you give using the unified $5.25 million exclusion will reduce the estate tax cushion that can be applied to your estate after your passing.

There is however a $14,000 per person annual exclusion that can be used to give tax-free gifts to an heir or heirs. The utilization of this exclusion does not reduce your lifetime exclusion.

Funding a 529 college savings plan for the benefit of a young heir is considered to be an act of taxable gift giving by the Internal Revenue Service. However, you could use this $14,000 annual exclusion to fund the account. If you do this these gifts can be given free of taxation.

If you want to you could actually contribute up to $70,000 all at once. Under IRS rules it is possible to split this gift up into $14,000 increments given over five different years for tax purposes.

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About Mark S. Eghrari, Estate Planning Attorney

Mark S. Eghrari is an attorney in private practice in Smithtown, New York. He has been in practice since 1988. Mark S. Eghrari provides extensive estate and tax planning services to individuals and businesses. Mr. Eghrari’s primary focus is helping clients avoid probate, minimize or eliminate Federal and State Estate taxes and protect their assets from the high cost of nursing care, if they become ill.