The Gift of Education is Perfect for Any Occasion!
Whether your children, grandchildren, nieces/nephews, other family members or friends are in kindergarten, elementary school or high school – what better way to celebrate a child’s education than with a contribution to their 529 plan accounts? Nearly all 529 plans have safe and convenient ways for friends and family to contribute to established accounts. In addition, several commercial websites both affiliated and unaffiliated with 529 plans provide tools to assist with gift giving. It’s important that parents do their homework before encouraging gifts for their own child and that friends and family who would like to make a gift contribution understand the process as well.
For those looking to give the gift of education, CSPN offers the following tips:
Tip #1 – Maximize your gift with the child’s existing 529 plan
State-administered 529 plans make it easy for friends and family to contribute directly to a student’s existing savings account. The plans generally accept contributions by check or ACH only, don’t charge a fee for the gift, and gifts are typically deposited directly to the child’s account.
Tip #2 – Understand how gifting services work
Understand the process of making a gift through a gifting service whether affiliated with your 529 plan or not. Know how long it will take for a gift to reach the 529 account and the safeguards the plan or company has in place for the funds. These services may offer conveniences such as paying with a credit card and thus, may have fees associated with processing a gift. If fees are charged, understand how the fees are calculated and who will pay them.
Tip #3 – Follow Up
Once you hit send on a gift contribution or drop it in the mail, be sure to follow up. Check with the recipient’s family to ensure that they received the contribution in their 529 account and that they know it came from you.
Tip #4 – Have a family discussion
Some gifting services allow gift givers to contribute toward a child’s education even if the child does not yet have an established 529 plan. Make sure the parents or legal guardians know about your gift, and what steps they need to take to receive it. Keep in mind, too, that a child may have more than one active 529 account. This means that grandparents or other relatives can open their own 529 plan account on behalf of a student, managing their gift of education on their own.
Tip #5 – Take a break
Don’t miss out on an opportunity to take a state income tax deduction or credit for your 529 plan contributions. More than 30 states and the District of Columbia offer a state tax incentive for contributions to 529 plans. Some even allow these deductions or credits to be taken by third parties who make gifts into an account. Also consider whether you or your loved one’s home state offers state income tax or other benefits that may not be available in other plans or by purchasing a gift card that is not affiliated with a particular 529 plan.