Author: Deborah Goodkin, Managing Director, Savings Plans, First National Bank of Omaha
During back to school season, it is particularly heartwarming to watch our loved ones embark on a new year of academic exploration - bringing them that much closer to a bright and successful future.
Many grandparents are searching for the most impactful way to support their grandchildren financially during this exciting path to adulthood and independence. With a NEST 529 College Savings Plan account, grandparents can achieve this by helping their grandchild access the higher education that is right for them, while minimizing reliance on student loans - providing a gift that will last a lifetime.
If you are a grandparent who is considering opening a NEST 529 account for your grandchild, keep these features in mind:
529 college savings plans offer numerous tax benefits to boost the higher education savings journey. These tax advantages are useful for all Account Owners, regardless of age - however they can be particularly valuable for grandparents.
Unlike trusts, which are subject to high tax rates, NEST 529 account earnings grow tax-deferred, and are withdrawn tax-free, as long as they are used for qualified higher education expenses. This means that more dollars go directly to your grandchild’s future - and, thanks to compounded interest, the account has an optimized environment to grow.
The benefits don’t end there. In some states, NEST 529 Account Owners can take advantage of income tax deductions for their contributions. In Nebraska, Account Owners can claim up to $10,000 per year, or $5,000 if married and filing separately.
Furthermore, NEST 529 contributions qualify for the gift tax exclusion. In a single year, grandparents can contribute up to $15,000 per beneficiary from their federal taxable estate without incurring gift tax, and up to $75,000 per beneficiary in a single year, as long as there is no additional gift to the beneficiary for five years. This maximum doubles if filing jointly.
These advantages also make college savings a smart place to invest required minimum distributions (RMDs) while avoiding tax on their future earnings. Combined, these many tax advantages make NEST 529 a strong choice for grandparents looking to maximize the tax impact of their financial support.
Retirement can come with unexpected expenses. Before making the decision to open an account for a grandchild, many grandparents want to be sure that they will have access to their funds and to flexibility in their accounts in case of emergency.
NEST 529 works hard to ensure that Account Owners in all stages of life can save for higher education without sacrificing financial security. With NEST 529, there is no minimum amount needed to open an account or contribution minimum needed to maintain one. Account Owners can deposit in lump sums if this is their preference, or save any amount monthly through the Automatic Investment Plan (AIP).
Additionally, in the case that a grandchild no longer needs the funds, NEST 529 makes it easy to switch the beneficiary to another member of the family - allowing for flexibility should plans change.
With NEST 529 Account Owners can withdraw funds at any time and for any reason - meaning grandparents never have to worry about losing access to their funds in case of emergency. Though there may be penalties and tax implications associated with making non-qualified withdrawals, it is important that this process be available to all, empowering Account Owners to save as much as they choose, while retaining access should extraordinary circumstances arise.
Do you have questions about saving with NEST 529, or how to open an account? Do not hesitate to reach out to our team, via email at email@example.com or by calling 1-888-993-3746.