Leaving a Legacy with 529’s
If you are fortunate enough to be saving enough to fully fund your child/grandchild’s college education in a 529 account, you may be worried that they won’t use it all. Fortunately, 529 accounts are transferrable and if you are the owner, they can be moved to someone else.
For example, let’s say you have saved $100,000 in a 529 account for your child, John. If John goes to college for 4 years and only spends $80,000, there is $20,000 left. There are a few great options for what to do with the remainder.
- Transfer it to another family member – You might transfer it to John’s sister or your niece or nephew.
- Transfer it to yourself – Maybe you want to take a class or go back to school. You could use the funds for yourself!
- Save for future generations – You could also just wait and see what generations come after John. You could give this account to John when he has his own child and bless even younger generations. You should consult a tax advisor for possible estate tax consequences. The power of compound growth really works in your favor here.
Example - $20,000 left in a 529 account when your child, John, is 21. John gets married and has a child, John Jr., when he is 33. John Jr. goes to college 18 years later, when John is 51, 30 years after he left college. If that $20,000 was invested for all 30 years in stock mutual funds earning, for example, 8% per year (not guaranteed), you would have nearly $200,000! That’s a legacy that your child and grandchildren will remember!
Disclaimer: Alex Voorhees and Reston Wealth Management do not provide legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized investment, tax or legal advice. We suggest that you discuss your specific situation with a qualified investment, tax or legal advisor. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) or strategies may be appropriate for you, consult your financial advisor prior to investing. No strategy assures success or protects against loss and past performance does not guarantee future results. You should consider the investment objectives, risks, charges and expenses of any investment carefully before investing. You cannot invest directly in an index.