One of the most powerful gifts you can give the next generation is the opportunity for a strong start. Whether thinking about your children’s future or your grandchildren’s, education planning is a strategic and meaningful way to pass on wealth, values, and financial stability. With the rising cost of education and evolving tax laws, thoughtful planning can ensure your financial support not only helps your loved ones today but also supports your long-term legacy. This is where 529 plans come in.
Why Education Planning Belongs in Your Wealth Transfer Strategy
For high-net-worth families and individuals, wealth transfer is about building a legacy, not just numbers, and funding an education is one of the most impactful ways to do so. Helping a child or grandchild graduate debt-free opens doors for their future and reinforces a commitment to lifelong learning.
Education planning also allows you to express your values while remaining strategic with your financial resources. It’s an opportunity to teach financial responsibility, support future goals, and make a lasting impact, all while benefiting from smart tax strategies.
Understanding the 529 Plan Advantage
529 college savings plans are one of the most flexible and tax-advantaged ways to invest in education. These accounts allow your contributions to grow tax-deferred, and as long as withdrawals are used for qualified education expenses, they are completely tax-free. This includes tuition, room and board, books, and even some technology and equipment expenses.
Depending on your state, you may also receive a state tax deduction for your contributions. 529 funds are also flexible – they aren’t just for college anymore! Eligible expenses can now include K-12 education, certain vocational and apprenticeship programs, and more.
Strategic Uses of 529 Plans for High-Income Earners
For high earners and legacy-minded individuals, 529 plans can serve a dual purpose: education funding and wealth transfer. Here are some strategic uses of 529 plans you may consider:
- Superfunding 529 Plans: One powerful strategy is “superfunding” a 529 plan. This allows you to contribute up to five years’ worth of gifts at once without triggering federal gift taxes. This is currently up to $95,000 per beneficiary for individuals or $100,000 for couples, and can significantly jumpstart the account’s growth potential.
- Maintaining Control and Flexibility: Unlike other forms of gifting, you retain control of the account and can change the beneficiary if needed. This flexibility is especially valuable for families with multiple children or grandchildren.
- Multi-Generational Planning: Some families are even using 529 plans to plan for future generations, opening accounts for grandchildren, or even children not yet born, to ensure education funding remains a part of the family legacy.
New Rules, More Flexibility
Recent updates from the SECURE 2.0 Act have made 529 plans even more appealing:
- Roth IRA Rollovers: Unused 529 funds can now be rolled over into a Roth IRA for the beneficiary (subject to limits and requirements), reducing the risk of overfunding and offering an additional retirement boost.
- Expanded Qualified Expenses: The list of allowable education expenses has grown, offering more ways to use your savings efficiently.
These changes make 529 plans more versatile than ever and help ensure your contributions can serve multiple purposes over time.
Integrating Education Planning with Your Broader Financial Plan
At Blakely Financial, we review education planning as a key part of a comprehensive financial strategy. From tax planning and retirement strategies to estate and legacy planning, we help our clients align their education goals with their full financial picture. We regularly review 529 plans as part of our ongoing planning process, helping you adapt to changes in tax law, family dynamics, or your financial priorities.
Funding the next generation’s education is one of the most lasting and personal forms of wealth transfer. It’s a way to support your loved ones, reflect your values, and build a foundation for long-term success. Whether you’re just getting started or refining your existing strategy, our team at Blakely Financial is here to help. Let’s work together to create a plan that empowers the next generation and strengthens your legacy in the process.