Author: Terry Severson, Director, Savings Plans Marketing, First National Bank of Omaha
As a grandparent, there’s nothing better than watching your grandkids grow up and achieve their dreams. Contributing to their college expenses with a NEST 529 Plan seems like a no-brainer, but many retirees want to be sure that these savings won’t interfere with their personal financial plans. Here’s the key information that will help grandparents save for their grandkids’ future without having to worry about their own:
Withdrawals and Beneficiaries
Retirement can come with unexpected expenses, and many grandparents want to be sure that they’ll have access to their savings in case of emergency. NEST 529 allows account holders to withdraw funds at any time and for any reason, so grandparents never have to worry about jeopardizing their financial security. That being said, it’s important to familiarize yourself with the penalties and tax implications associated with making non-qualified withdrawals in the event that such action becomes necessary.
Additionally, in the case that your grandchild no longer needs the funds, NEST 529 also makes it easy to switch the beneficiary to another member of the family.
Taxes and Estate
In many states grandparents can take advantage of tax deductions and other benefits for their contributions. Furthermore, unlike trusts, which are subject to high tax rates, NEST 529 earnings are tax free as long as they are used for qualified higher education expenses. You can also take advantage of gift and estate tax benefits. Contributions are considered completed gifts and are taken out of your taxable estate. In a single year you can contribute up to $15,000 per beneficiary from your federal taxable estate, and up to $75,000 per beneficiary in a single year without incurring gift tax, as long as there is no additional gift to the beneficiary for five years. This maximum doubles if filing jointly.
These advantages also make NEST 529 accounts a great place to invest required minimum distributions (RMDs) while avoiding tax on their future earnings.
Best of all? NEST 529 is easy to manage, offering automatic investment plans or payroll direct deposits, which make regular monthly contributions virtually painless.
In addition, our age-based investment options automatically shift investments based on the age of the beneficiary, so you won’t have to worry about making changes as your grandchild gets closer to college.
The Bottom Line
Investing or gifting in a NEST 529 account is a simple and reliable way to support your grandchild’s educational future. Offering control and flexibility with your savings, as well as a variety of financial benefits, it’s a great way to foster your grandchild’s dreams and set them up for a financially stable tomorrow without compromising your own financial stability throughout retirement.
For more information on saving with NEST 529, visit the Grandparents page on our website.