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McClellan Legal LLC Estate Planning & Tax Assessment Blog

Tuesday, July 5, 2016

529 Plans and Estate Planning

The vast majority of people believe that a college education is important, but only a small minority of people are adequately saving for the ever growing costs of their children’s education.  While college education is definitely not the only path to future financial success, it is a proven head start that should not be ignored.  Over the past couple decades, Congress and state governments have shifted their priority from subsidizing higher education costs via grants and direct institution support to tax incentives for individuals. 

Therefore, if an individual does not adequately plan to take advantage of tax incentives offered via 529 plans, then the net cost of college will increase at an even faster rate than the current average 5% increase.  529 plans allow parents/grandparents to more efficiently save for college expenses in a tax favorable environment without income-based limitations that are found in most tax laws.  In addition to tax advantages, 529 plans also provide asset protection from creditors in many states (including Pennsylvania).

As an estate planning attorney, it is my goal to help my clients identify and solve various problems.  One of the largest problems that my clients face is the lack of planning to ensure that there will be sufficient resources to pay for their children or grandchildren’s college expenses.  Along with your other trusted advisors (e.g., financial advisor, CPA, life insurance professional), I can assist you with developing a coordinated plan to save for the costs of your children or grandchildren’s higher education while balancing higher priority planning for every day expenses and retirement.  When developing your plan, we will discuss issues like 529 beneficiary designations, 529 federal and state tax incentives, and asset protection.

Additionally, if you are a grandparent with a legacy goal of assisting your grandchildren with the cost of higher education, there is no better estate planning tool for providing money for education expenses while minimizing taxation of your estate.   529 plans allow grandparents to instantly move large sums of money out of their taxable estate (e.g., currently $70,000 per beneficiary) while having the unique ability to pull the money back in case of a financial emergency.  I am unaware of any other estate planning tool that offers the remarkable ability to remove money from your taxable estate and have easy access to get the money back if absolutely needed.

If you would like to learn more about planning for higher education costs with the tax incentives and asset protection offered via 529 plans, then call my office to set up an estate planning consultation. 




McClellan Legal LLC is located in Kennett Square and serves clients throughout the areas of Avondale, Chadds Ford, Coatesville, Downingtown, Landenberg, Oxford, Phoenixville, Pottstown, West Chester, & West Grove. We also serve the following towns in Lancaster County: Lancaster, Lititz, Strasburg,Millersville, Ephrata, Leola, Manheim, New Holland, Willow Street, Quarryville, Elizabethtown and Mountville.



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113 South Broad Street, Kennett Square, PA 19348
| Phone: 610-444-5552

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