529 Planning Services
Concierge Financial Planning for Your Child’s Education
Strategies catered to your child’s higher education expenses, so they can focus on what’s important: setting the groundwork for a successful life.
529 Plans & College Planning with Cadeau
Preparing for your child’s education is one of the best investment decisions you can make as a parent. What that preparation looks like can vary, though, depending on your personal risk tolerance, your child’s career aspirations, and more. A 529 plan is a core component of many parents’ holistic approach to college planning. And the 529 plan advisors at Cadeau Family Wealth are here to help you determine if one of these accounts makes sense for your family’s unique situation.
What is a 529 Savings Plan?
How Can It Help Fund My Child’s Education?
A 529 plan is a savings plan that many families use to fund education expenses. Also called a qualified tuition program, this type of state-sponsored plan offers significant tax advantages like tax-deferred growth as well as tax-free withdrawals on qualified expenses, which can include student loans and tuition. Anyone can contribute to one of these accounts, and it is managed solely by the account owner, rather than the designated beneficiary.
In short, a 529 account helps fund your child’s education through tax benefits like tax-free growth and qualified withdrawals, meaning the money in the account all goes towards your child’s education, not the IRS.
Which Type of 529 Plan
Account is Right for My Family?
A 529 plan is a savings plan that many families use to fund education expenses. Also called a qualified tuition program, this type of state-sponsored plan offers significant tax advantages like tax-deferred growth as well as tax-free withdrawals on qualified expenses, which can include student loans and tuition. Anyone can contribute to one of these accounts, and it is managed solely by the account owner, rather than the designated beneficiary.
In short, a 529 account helps fund your child’s education through tax benefits like tax-free growth and qualified withdrawals, meaning the money in the account all goes towards your child’s education, not the IRS.
529 Plan Advisor FAQs
What is the 5-year rule for 529 plans?
Many people refer to the 5-year rule for 529 plans as superfunding. Superfunding lets people who file IRS Form 709 contribute a significant amount—as much as 5 times the annual gift tax exclusion limit—towards a 529 account in a single year. This strategy lets people contribute to a 529 plan while avoiding gift taxes, meaning more money can go directly toward a child’s education.
What are the benefits of a 529 plan?
Some of the primary benefits to incorporating 529 accounts in a larger college planning strategy include:
- Tax benefits. A 529 plan offers tax advantages not just at the federal level, but also at the state level; many states offer a state tax deduction on state income tax for contributions to these plans.
- Flexibility. Parents can use many of these accounts not just for qualified college expenses, but also for qualified expenses for enrollment and participation in K-12 and apprenticeship programs.
- Rollovers. The 529 account owner can roll over $35,000 or less into a Roth IRA account for the 529 account beneficiary.
- Fewer restrictions. Many 529 accounts have fewer income restrictions and often have lower contribution limits than other types of education savings plans, such as a Coverdell Education Savings Account (ESA).
- Minimal financial aid impact. Parent-owned 529 plans have a relatively small impact on financial aid eligibility, and grandparent-owned accounts are not counted toward student or parent income on FAFSA filings, allowing them to supplement college funding strategies for many families.
What are the downsides of a 529 plan?
529 plans help many families plan for the future, but they’re not the right decision for everyone. Potential drawbacks of 529 plans include:
- Not all are FDIC insured. The Federal Deposit Insurance Corporation (FDIC) does not insure every 529 account, which may not be preferable for some people, depending on their risk tolerance.
- Penalties for non-qualified withdrawals. Any withdrawals not used for qualified expenses are subject to steep penalties.
- Fewer investment options. 529 plans offer fewer investment options compared to brokerage accounts or similar plans.
Who can I talk to about a 529 plan?
If you want to explore a 529 plan to help fund education expenses, get in touch with the financial professionals at Cadeau Family Wealth. We are licensed financial advisors and investment managers with years of experience helping high-net-worth families strategically plan for education expenses, and we’re excited to help your family set the groundwork for a rewarding financial future.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses, summary prospectuses and 529 Product Program Description, which can be obtained from a financial professional and should be read carefully before investing. Depending on your state of residence, there may be an in-state plan that offers tax and other benefits which may include financial aid, scholarship funds, and protection from creditors.. Before investing in any state’s 529 plan, investors should consult a tax advisor. If withdrawals from 529 plans are used for purposes other than qualified education, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax.
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