Smart529

The Gift of College: A Lasting Legacy

GrandparentSMART529 offers federal and state tax advantages, account owner control, estate planning opportunities.

Being a grandparent has many rewards. Helping your grandchild save for the rising cost of a college education can also be fulfilling.

According to The College Board, over the past 10 years alone, average tuition and fees have risen 51% at public four-year colleges and universities. And, the national average cost of tuition at four-year public universities rose to $6,585 in 2008—an increase of almost 7% from the year before.1

To help keep up with these rising costs, consider making a gift to a Section 529 Qualified Tuition Program for your grandson or granddaughter. These tax advantaged college savings plans are named after the section of the Internal Revenue code that authorized them, and are designed to make saving for college easier.

SMART529, West Virginia’s college savings solution, is a flexible, convenient way to help you invest toward your grandchild’s college savings goals. SMART529 assets can be used for qualified higher education expenses at any eligible educational institution nationwide.

Qualified higher education expenses include:  

  • tuition
  • fees
  • room and board
  • books
  • equipment and supplies required for attendance

Eligible education institutions include:

  • two or four-year public or private colleges and universities
  • vocational or technical school
  • graduate and professional schools which are eligible to participate in a student aid program administered by the United States Department of Education.

Gifts such as toys or clothing will simply be outgrown over time, but a college education will benefit your grandchild for years to come. Making a gift through SMART529 can be one way of ensuring you will leave a lasting legacy for the next generation of your family.

Tax Advantages
Earnings on SMART529 contributions are tax-deferred, which means more assets remain invested to potentially accumulate over time. Because assets are not taxed annually, there is no annual IRS Form 1099.2 And withdrawals from SMART529 taken for qualified higher education expenses are federal income tax free.3

In addition, contributions made to SMART529 by December 31 each year can be used as a modification reducing your federal adjusted gross income for West Virginia personal income tax purposes.

Account Owner Control
As the owner of a SMART529 account, you determine how your contributions are invested and when withdrawals are made. This ensures that your grandchild won’t use the money for something other than education. You can even choose to pay the tuition directly to a college or university. If the need arises, taxable withdrawals may be made at any time.3

If your grandchild decides not to attend college, the beneficiary on the account can be changed federal income tax free to any of the current beneficiary's eligible family members.

You may also designate a successor account owner who, in the event of your death or disability, will take over the responsibilities of account owner.

Estate Planning
SMART529 can also be a valuable estate planning tool. Amounts invested are removed from your taxable estate. Contributions of up to $65,000 ($130,000 if gift splitting) can be gifted to a beneficiary once per 5-year period without incurring federal gift tax by filing IRS Form 709.4

Start SMART — Make a Gift Today
Starting a SMART529 account for your grandchild is easy. You can fund the account with contributions made by personal check, or transfer money from a variety of sources including Coverdell Education Savings Accounts and Series EE U.S. Savings Bonds. And once you have opened an account, anyone can make additional contributions, including other family members and friends. A contribution now can make a difference in your grandchild’s future.

 

1Trends in College Pricing, 2008, a survey of over 3,500 post-secondary institutions conducted by The College Board, a not-for-profit scholastic organization.

2 IRS Form 1099Q will be sent for any year in which a withdrawal is made.

3 Non-qualified withdrawals are taxable as ordinary income to the extent of earnings and may also be subject to a 10% federal income tax penalty and state tax implications.

4 If the donor elects to treat a gift as being made over 5 years, and the donor dies prior to the end of that 5- year period, the portion of the gift allocable to the period after the donor’s death will be included in the donor’s estate. Estate tax treatment may differ by state. Any additional gifts to the same Designated Beneficiary in that 5-year period would be subject to federal gift tax. Please consult your tax advisor for more information.

Updated 12/08/2015