It’s not enough to simply know they exist and to know strategies to minimize them. When it comes down to it, you need to plan how you and your family will eventually pay them.

THE ESTATE TAX DILEMMA

Estate taxes are generally due nine months after the date of death. And they are due in cash. In addition to estate taxes, there may be final expenses, probate costs, administrative fees, and a variety of other costs. How can you be sure the money will be there when it’s needed?

ESTATE TAX OPTIONS

There are four main sources of funds to pay estate taxes. First, your current savings and investments. You or your survivors can use savings and investments to cover the costs of estate taxes, probate fees, and other expenses. This is often a sound alternative. However, sometimes savings and investments may not be sufficient. And if those savings were earmarked for other financial goals, you may need to rethink how you will achieve those goals.

Another option would be to borrow the money. Unfortunately, with this option you not only have to pay the estate taxes, but you or your survivors will be forced to pay interest on the amount borrowed to pay estate taxes. Remember to consider how your family’s credit standing will be affected by a death in the family.

The third option involves liquidation. If estate taxes are larger than the cash available to pay them, you or your heirs may have to sell valuable assets such as the family home, the family business, or other assets. Hopefully, they will sell for what they’re worth. In many cases, however, they don’t.

The fourth option — one that is often a prudent way to pay estate taxes — is life insurance.

WHAT CAN LIFE INSURANCE PROVIDE?

Life insurance can provide a timely death benefit, in cash, that can be used to pay estate taxes and other costs. And it will be paid directly to the beneficiary of the policy, without being subject to the time and expense of probate.

Granted, life insurance does require premium payments. However, if appropriate to your situation, life insurance premiums can be looked at as a systematic way of funding future estate taxes. You get guaranteed liquidity and a death benefit that is generally free of federal income taxes. Indeed, the financial protection provided by life insurance can be invaluable to those who have the burden of paying estate taxes — your loved ones.


The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving insurance, it would be prudent to make sure you are insurable. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Any guarantees are contingent on the financial strength and claims-paying ability of the issuing company. Before you take any specific action, be sure to seek professional advice.


Coping with estate taxes may be a difficult proposition for you or your survivors. When it comes to paying them, life insurance may be a strategy worth considering, and overlooking it could be costly.
An irrevocable life insurance trust can be used to keep the insurance proceeds from being subject to estate tax at your death. There are costs and expenses associated with the creation and operation of a trust.

The information in this newsletter is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2018 Broadridge Investor Communication Solutions, Inc.

There are a number of ways your estate can be distributed to your heirs after your death. Each allows a different degree of control over distribution, and each poses different challenges and opportunities. If you haven’t taken steps already, it’s important to consider planning now for the distribution of your assets.

INTESTACY
If you die without a will, it is called dying “intestate.”

In these situations, the probate court will order your debts paid and your assets distributed. Unfortunately, your assets will be distributed according to state law. Since the state doesn’t know your preferences, the probate court may not distribute your assets according to your wishes.

Because intestacy is settled in the probate court, your heirs may have to endure a long, costly, and public probate process that could take six months to a year or more. They will have to wait until the probate process is over to receive the bulk of their inheritance.

And depending on the state, probate fees could be very expensive.

WILLSA
will is your written set of instructions on how you want your estate to be distributed. While using a will guarantees probate, it is a more desirable alternative than intestacy.

In a will, you can name a “personal representative” of your estate. This person or institution (e.g., a bank or trust company) will act as the executor and will be appointed to carry out your wishes according to your testament. You can also nominate a guardian for your minor children and their estates. Without such a nomination, the court can appoint a guardian based on other information, often depending upon who volunteers.

A will can also set forth the trust terms, including who you have named as trustee to manage the assets for the benefit of your beneficiaries. This is often referred to as a “testamentary” trust because it is created as part of the last will and testament and takes effect at the probate of the will.

TRUSTS
A trust is a legal arrangement under which one person, the trustee, manages property given by another party, the trustor, for the benefit of a third person, the beneficiary. Trusts can be very effective estate planning tools.

Trusts can be established during your life or at death. They give you maximum control over the distribution of your estate. Trust property will be distributed according to the terms of the trust, without the time, cost, and publicity of probate.

Trusts have other advantages, too. You can benefit from the services of professional asset managers, and you can protect your assets in the event of your incapacity. With certain types of trusts, you may also be able to reduce estate taxes.

If you use a revocable living trust in your estate plan, you may be the trustor, trustee, and beneficiary of your own trust. This allows you to maintain complete control of your estate.

While trusts offer numerous advantages, they incur up-front costs and ongoing administrative fees. These costs reduce the value of future probate savings.The use of trusts involves a complex web of tax rules and regulations. You might consider enlisting the counsel of an experienced estate planning professional before implementing such sophisticated strategies.

JOINT OWNERSHIPAnother way to distribute your estate is through jointly held property — specifically, joint tenancy with rights of survivorship. When you hold property this way, it will pass to the surviving co-owners automatically, “by operation of law.” Because title passes automatically, there is no need for probate.

Joint tenancy can involve any number of people, and it does not have to be between spouses. “Qualified joint tenancy,” however, can only exist between spouses. In common law states, this arrangement is generally known as “tenancy by the entirety.” Qualified joint tenancy has certain income and estate tax advantages over joint tenancy involving nonspouses.

How you hold title to your property may have substantial implications for your income and estate taxes. You should consider how you hold title to all of your property, including your real estate, investments, and savings accounts. If you’d like to know more about how the way you hold title may affect your financial situation, consult a professional.

CONTRACTS
The fifth and final way to pass your property interests is through beneficiary designations.
If you have an employer-sponsored retirement plan, an IRA, life insurance, or an annuity contract, you probably designated a beneficiary for the proceeds of the contract. The rights to the proceeds will pass automatically to the person you selected. Just like joint tenancy, this happens automatically, without the need for probate.

It is important to review your employer-sponsored retirement plan, IRA, life insurance, and other contracts to make sure your beneficiary designations reflect your current wishes. Don’t wait until it’s too late.

MANY CONSIDERATIONS
A variety of considerations will determine the distribution methods that are appropriate for you. For example, you must consider your distribution goals. By examining your situation and understanding how your assets will pass after your death, you may be able to identify the methods that will help you achieve your goals most effectively.

Likewise, the larger your estate, the more you may want to use a trust to help guide your estate distribution. In addition, you will have to consider any special situations you may have — such as a divorce or a disabled child. All these are important factors to think about.

The information in this newsletter is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2018 Broadridge Investor Communication Solutions, Inc.

Building an estate can take years of diligent saving and investing. Once you have built up an estate, you’ll want to make sure that you preserve its value for your heirs. You can also add to or create a valuable estate by using life insurance.

WHY CREATE AN ESTATE?

Premature death can result in financial difficulties for your survivors. By using life insurance to protect against this outcome, you can rest assured that your heirs will be cared for financially in your absence.

If you wish, you can also ensure that other financial goals are achieved. Because the premature death of a breadwinner could make college savings or mortgage repayment impossible, steps should be taken to prepare for these possibilities. Life insurance provides a cost-effective way to guard against the threat of interrupted financial goals.

A CASE STUDY

The following example illustrates the concept of estate creation.

Paul Pringle, a 40-year-old computer programmer, would like to begin a savings program. He and his wife, Pam, have two children, ages 10 and 8. He feels he can afford to save about $3,000 per year.

Among his options, he could choose to invest in a traditional IRA. His contributions would be fully deductible and would grow on a tax-deferred basis. This could help provide a respectable retirement nest egg. However, it would not be accessible for most other purposes without penalty before he turns 59½.

For the same annual amount, he could choose to purchase a whole life policy. He could choose a fixed premium, and his cash value would be allowed to grow tax-free, under current tax law, just like in the IRA. Unlike IRA contributions, however, whole life policy contributions are generally not tax deductible.

Paul would have penalty-free access to the cash value through policy loans or withdrawals.* And in the event of Paul’s premature death, his family would receive the policy proceeds free of income tax. The proceeds would help to maintain his family’s standard of living, and it could ensure a college education for both of their children.

FINANCIAL LEVERAGE

In the unfortunate event that Paul dies prematurely, his policy could generate a significant amount of wealth. For a potentially low premium investment, Paul can create an estate that might take 20 to 30 years to accumulate in an IRA.

LIFE INSURANCE: A CLEAR ADVANTAGEThe security provided by life insurance, combined with the opportunity to create an estate, makes this choice a logical one for many families. Consult an advisor to see how you can help provide financial security for your family.
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* Access to cash values through borrowing or partial surrenders can reduce the policy's cash value and death benefit, increase the chance that the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured. Additional out-of-pocket payments may be needed if the actual cash dividends or investment returns decrease, if you withdraw policy values, if you take out a loan, or if current charges increase. The cost and availability of life insurance depend on factors such as age, health, and type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable. Any guarantees are contingent on the claims-paying ability of the issuing company. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies typically have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications.


The information in this newsletter is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2018 Broadridge Investor Communication Solutions, Inc.

GIVING BASICS
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You’re free to give almost any type of property to whatever organization you choose. But in order to retain the tax benefits associated with charitable giving, contributions need to be made to qualifying tax-exempt organizations that have been organized in the United States and meet certain criteria. In addition to common charitable organizations that operate exclusively for religious, charitable, scientific, or educational purposes, you may give to veterans' posts, certain fraternal orders, volunteer fire departments, and civil defense organizations but not politically active groups.

The income tax deduction for your charitable gift will be determined in part by the type of property you give and the type of entity receiving it.

With an outright gift, you might receive an immediate income tax deduction that could equal the value of your gift, up to certain limits. You can carry forward any gift amount that exceeds these limits for up to five years. Noncash gifts are more restrictive.

In addition to outright gifts, planned giving offers a way to make larger gifts than you might otherwise be able to do. For example, by donating highly appreciated assets (such as stocks) during your lifetime, you may be able to help reduce or avoid paying capital gains taxes, thus potentially enhancing the value of your gift to the charitable organization and increasing your tax savings.

MORE GIFTING STRATEGIES

A gift of life insurance enables you to donate more than you might currently have available and results in a larger future gift to the charitable organization. If the charity is named as owner and beneficiary of the policy, you can receive an income tax deduction for the premiums you pay, within certain limits.

With a charitable lead trust, you (as grantor) place money or income-producing assets in the trust. The income generated from the assets is donated to the charitable organization for the duration of the trust. At the end of the trust period, the remaining assets are paid to you or to your heirs. This can help reduce, or in some cases even eliminate, estate taxes on appreciated assets that are eventually transferred to your heirs.

Using a charitable remainder trust, you (as donor or grantor) donate property to the trust, naming the charitable organization as beneficiary, and you receive regular payments from the trust for a specific number of years or your lifetime. You are generally taxed on distributions to you from the trust. You may also qualify for a current income tax deduction on the estimated present value of the remainder interest that will eventually go to charity. And even though you cannot take your gift back once it’s in the trust, you can change the charity that will eventually receive your gift.

Giving strategically can benefit both you and the charitable organization you choose, and could potentially benefit your heirs. A properly planned gift might enable you to realign your investment portfolio, help diversify your holdings, increase your cash flow — and help leave a greater legacy.
Whatever gifting strategy you choose, planned giving can be very rewarding. It’s wonderful to see your gift at work and to receive tax benefits as well.

While trusts offer numerous advantages, they incur up-front costs and ongoing administrative fees. The use of trusts involves a complex web of tax rules and regulations. You might consider enlisting the counsel of an experienced estate planning professional and your legal and tax advisors before implementing such strategies.


The information in this newsletter is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2018 Broadridge Investor Communication Solutions, Inc.

Have you ever wondered what will happen to your estate after you die? How long will it take for your loved ones to receive the estate you’ve left them? Will each receive what you’d like them to have?

If you’re like most people, your estate will go through a lengthy probate process.

Probate consists of the court proceedings that conclude all your legal and financial matters after your death. The probate court distributes your estate according to your wishes — if you left a valid will — and acts as a neutral forum in which to settle any disputes that may arise over your estate.

The probate process we have today is based largely on the medieval English legal system. In feudal times, only powerful families owned land. These large estates were normally passed down from father to son. This transfer was naturally a matter of great political consequence, and thus of great interest to the king. So the proceedings were made formal, complicated, and costly.

Over the years, while much of the legal system has been made easier and more accessible, the probate process has remained lengthy and complex.

There are a number of problems with the probate process that make it worth avoiding.

The probate process can take a great deal of time. It often takes a few months to a year or more. Complex or contested estates can take much longer. With few exceptions, your heirs will have to wait until probate is concluded to receive the bulk of their inheritance.

Probate costs vary depending on the state in which probate is carried out. Though all states require the payment of court fees (which may only be a few hundred dollars), attorney fees could add significantly to the total cost. Typically, attorney fees are based on what is reasonable for the required tasks. These fees can rise significantly if the will is contested or when other extraordinary issues arise.

Of course, all the probate court’s “help” with your affairs comes at a price. Probate can be very expensive.
Depending on the state, probate and administrative fees can consume between 6 and 10 percent of your estate.1 That percentage is calculated before any deductions or liens are taken out.

The proceedings of the probate courts are a matter of public record. Anyone with the time and inclination can go to the county courthouse and find out exactly how much you left to each heir and to whom you owed money. This leaves your heirs with little or no privacy.

Fortunately, there are strategies you can use to help avoid the probate process altogether. A trust may enable you to pass your estate on to your heirs without ever going through probate at all. While trusts offer numerous advantages, they incur upfront costs and ongoing administrative fees. The use of trusts involves a complex web of tax rules and regulations. You should consider the counsel of an experienced estate planning professional and your legal and tax advisers before implementing such strategies.

Proper estate planning could enable you to pass your estate to your loved ones privately, without undue delay or expense.

Source: 1) LegalZoom.com


The information in this newsletter is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2018 Broadridge Investor Communication Solutions, Inc.

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Living trusts enable you to control the distribution of your estate, and certain trusts may enable you to reduce or avoid many of the taxes and fees that will be imposed upon your death.

A trust is a legal arrangement under which one person, the trustee, controls property given by another person, the trustor, for the benefit of a third person, the beneficiary. When you establish a revocable living trust, you are allowed to be the trustor, the trustee, and the beneficiary of that trust.

When you set up a living trust, you transfer ownership of all the assets you’d like to place in the trust from yourself to the trust. Legally, you no longer own any of the assets in your trust. Your trust now owns these assets. But, as the trustee, you maintain complete control. You can buy or sell as you see fit. You can even give assets away.

Upon your death, assuming that you have transferred all your assets to the revocable trust, there isn’t anything to probate because the assets are held in the trust. Therefore, properly established living trusts completely avoid probate. If you use a living trust, your estate will be available to your heirs upon your death, without any of the delays or expensive court proceedings that accompany the probate process.

There are some trust strategies that serve very specific estate needs. One of the most widely used is a living trust with an A-B trust provision.  The purpose of an A-B trust arrangement (also called a "marital and bypass trust combination”) is to enable both spouses to use the applicable estate tax exemption upon their deaths, which shelters more assets from federal estate taxes.

Before enactment of the 2010 Tax Relief Act and the higher federal estate tax exemption (which increased to $5.49 million in 2017 as a result of the American Taxpayer Relief Act of 2012), some estate planning was involved to ensure that both spouses could take full advantage of their combined estate tax exemptions. The latest major piece of tax legislation is the Tax Cuts and Jobs Act, which was signed into law on December 22, 2017. This Act doubled the federal estate tax exclusion to $11.18 million in 2018 (indexed annually for inflation). In 2026, the exclusion is scheduled to revert to its pre-2018 level. Typically, it involved creation of an A-B trust arrangement. Now that portability is permanent, it’s possible for the executor of a deceased spouse’s estate to transfer any unused exemption to the surviving spouse without creating a trust.

Even so, 18 states and the District of Columbia still have their own estate and/or inheritance taxes, many have exemptions or exclusions of less than the federal exemption amount, and only one (Hawaii) has a portability provision.1 By funding a bypass trust up to the state exemption amount, you could shelter the first spouse’s exemption amount from the state estate tax.

Thus, A-B trusts may still be useful, not only to preserve the couple’s state estate tax exemptions but also to shelter appreciation of assets placed in the trust, protect the assets from creditors, and benefit children from a previous marriage. In most cases, however, when couples have combined estate assets of $22.36 million or less in 2018, they might be better off just leaving everything outright to each other.

A living trust with an A-B trust provision can help ensure that a couple takes full advantage of the estate tax exemption for both spouses. When the first spouse dies, two separate trusts are created. An amount of estate assets up to the applicable exemption amount is placed in the B trust (or bypass trust). The balance is placed in the surviving spouse’s A trust (or marital trust), which qualifies for the estate tax marital deduction. This then creates two taxable entities, each of which is entitled to use the exemption.

The B trust is included in the taxable estate when the first spouse dies. But because it doesn’t exceed the estate tax exempted amount, no estate taxes will actually be paid. The surviving spouse retains complete control of the assets in the A trust. He or she can also receive income from the B trust and can even withdraw principal when needed for health, education, support, or maintenance.

Upon the death of the second spouse, only the A trust is subject to estate taxes because the B trust bypasses the second spouse's estate. If the assets in the A trust don’t exceed the applicable exemption amount, no estate taxes are owed. At this point, both trusts terminate and the assets are distributed to the beneficiaries, completely avoiding probate.
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While trusts offer numerous advantages, they incur up-front costs and ongoing administrative fees. The use of trusts involves a complex web of tax rules and regulations. You should consider the counsel of an experienced estate planning professional and your legal and tax advisors before implementing such strategies. 
 Source: 1) Forbes, 2017


The information in this newsletter is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2018 Broadridge Investor Communication Solutions, Inc.

By taking steps in advance, you have a greater say in how these questions are answered. And isn’t that how it should be?

Wills and trusts are two of the most popular estate planning tools. Both allow you to spell out how you would like your property to be distributed, but they also go far beyond that.

Just about everyone needs a will. Besides enabling you to determine the distribution of your property, a will gives you the opportunity to nominate your executor and guardians for your minor children. If you fail to make such designations through your will, the decisions will probably be left to the courts. Bear in mind that property distributed through your will is subject to probate, which can be a time-consuming and costly process.

Trusts differ from wills in that they are actual legal entities. Like a will, trusts spell out how you want your property distributed. Trusts let you customize the distribution of your estate with the added advantages of property management and probate avoidance. While trusts offer numerous advantages, they incur up-front costs and ongoing administrative fees. The use of trusts involves a complex web of tax rules and regulations. You should consider the counsel of an experienced estate planning professional and your legal and tax advisors before implementing such strategies.

Wills and trusts are not mutually exclusive. While not everyone with a will needs a trust, all those with trusts should have a will as well.

Incapacity poses almost as much of a threat to your financial well-being as death does. Fortunately, there are tools that can help you cope with this threat.

A durable power of attorney is a legal agreement that avoids the need for a conservatorship and enables you to designate who will make your legal and financial decisions if you become incapacitated. Unlike the standard power of attorney, durable powers remain valid if you become incapacitated.
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Similar to the durable power of attorney, a health-care proxy is a document in which you designate someone to make health-care decisions for you if you are incapacitated. The person you designate can generally make decisions regarding medical facilities, medical treatments, surgery, and a variety of other health-care issues. Much like the durable power of attorney, the health-care proxy involves some important decisions. Take the utmost care when choosing who will make them.

A related document, the living will, also known as a directive to physicians or a health-care directive, spells out the kinds of life-sustaining treatment you will permit in the event of your incapacity.The decision for or against life support is one that only you can make. That makes the living will a valuable estate planning tool. And you may use a living will in conjunction with a durable health-care power of attorney. Bear in mind that laws governing the recognition and treatment of living wills may vary from state to state.

Estate Planning Tip
Keep all your important financial and legal information in a central file for your executor. Be sure to include:
 • Letters of instruction
• Medical records
• Bank/brokerage statements
• Income and gift tax returns
• Insurance policies
• Titles and deeds
• Will and trust documents


The information in this newsletter is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2018 Broadridge Investor Communication Solutions, Inc.

Looking for a tax-advantaged college savings plan that has no age restrictions and no income phaseout limits — and one you can use to pay for more than just tuition?
Consider the 529 college savings plan, an increasingly popular way to save for higher-education expenses, which have more than tripled over the past two decades — with annual costs (for tuition and fees, and room and board) of more than $48,510 per year for the average private four-year college.1 Named after the section of the tax code that authorized them, 529 plans (also known as qualified tuition plans) are now offered in almost every state.
Most people have heard about the original form of 529, the state-operated prepaid tuition plan, which allows you to purchase units of future tuition at today's rates, with the plan assuming the responsibility of investing the funds to keep pace with inflation. Many state governments guarantee that the cost of an equal number of units of education in the sponsoring state will be covered, regardless of investment performance or the rate of tuition increase. Of course, each state plan has a different mix of rules and restrictions. Prepaid tuition programs typically will pay future college tuition at any of the sponsoring state's eligible colleges and universities (and some will pay an equal amount to private and out-of-state institutions).
The other type of 529 is the savings plan. It's similar to an investment account, but the funds accumulate tax deferred. Withdrawals from state-sponsored 529 plans are free of federal income tax as long as they are used for qualified college expenses. Many states also exempt withdrawals from state income tax for qualified higher education expenses. Unlike the case with prepaid tuition plans, contributions can be used for all qualified higher-education expenses (tuition, fees, books, equipment and supplies, room and board), and the funds usually can be used at all accredited post-secondary schools in the United States. The risk with these plans is that investments may lose money or may not perform well enough to cover college costs as anticipated.
In most cases, 529 savings plans place investment dollars in a mix of funds based on the age of the beneficiary, with account allocations becoming more conservative as the time for college draws closer. But recently, more states have contracted professional money managers — many well-known investment firms — to actively manage and market their plans, so a growing number of investors can customize their asset allocations. Some states enable account owners to qualify for a deduction on their state tax returns or receive a small match on the money invested. Earnings from 529 plans are not taxed when used to pay for eligible college expenses. And there are even consumer-friendly reward programs that allow people who purchase certain products and services to receive rebate dollars that go into state-sponsored college savings accounts.
Funds contributed to a 529 plan are considered to be gifts to the beneficiary, so anyone — even non-relatives — can contribute up to $15,000 per year in 2019 per beneficiary without incurring gift tax consequences. Contributions can be made in one lump sum or in monthly installments. And assets contributed to a 529 plan are not considered part of the account owner's estate, therefore avoiding estate taxes upon the owner's death.
Tax Cuts and Jobs Act of 2017 changes allows distributions from 529 plans to be used to pay up to a total of $10,000 of tuition per beneficiary (regardless of the number of contributing plans) each year at an elementary or secondary (k-12) public, private or religious school of the beneficiary’s choosing.
MAJOR BENEFITSThese savings plans generally allow people of any income level to contribute, and there are no age limits for the student. The account owner can maintain control of the account until funds are withdrawn — and, if desired, can even change the beneficiary as long as he or she is within the immediate family of the original beneficiary. A 529 plan is also extremely simple when it comes to tax reporting — the sponsoring state, not you, is responsible for all income tax record keeping. At the end of the year when the withdrawal is made for college, you will receive Form 1099 from the state, and there is only one figure to enter on it: the amount of income to report on the student's tax return.
BENEFITS FOR GRANDPARENTSThe 529 plan could be a great way for grandparents to shelter inheritance money from estate taxes and contribute substantial amounts to a student's college fund. At the same time, they also control the assets and can retain the power to control withdrawals from the account. By accelerating use of the annual gift tax exclusion, a grandparent — as well as anyone, for that matter — could elect to use five years' worth of annual exclusions by making a single contribution of as much as $75,000 per beneficiary in 2019 (or a couple could contribute $150,000 in 2019), as long as no other contributions are made for that beneficiary for five years. If the account owner dies, the 529 plan balance is not considered part of his or her estate for tax purposes. (If the donor makes the five-year election and dies during the five-year calendar period, part of the contribution could revert back to the donor's estate.)
As with other investments, there are generally fees and expenses associated with participation in a Section 529 savings plan. In addition, there are no guarantees regarding the performance of the underlying investments in 529 plans. The tax implications of a 529 savings plan should be discussed with your legal and/or tax advisors because they can vary significantly from state to state. Also note that most states offer their own 529 plans, which may provide advantages and benefits exclusively for their residents and taxpayers.
Before investing in a 529 savings plan, please consider the investment objectives, risks, charges, and expenses carefully. The official disclosure statements and applicable prospectuses — which contain this and other information about the investment options, underlying investments, and investment company — can be obtained by contacting your financial professional. You should read these materials carefully before investing.
By comparing different plans, you can determine which might be available for your situation. You may find that 529 programs make saving for college easier than before.
Sources:  1) The College Board, 2018


The information in this newsletter is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the ­purpose of ­avoiding any ­federal tax penalties. You are encouraged to seek advice from an independent professional ­advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the ­purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2019 Broadridge Investor Communication Solutions, Inc.