Whether
they are graduating from kindergarten, elementary school or high
school, you can celebrate a child’s education
with a contribution to their 529 Plan college savings account. This
graduation season, in order to encourage families and friends to give
the gift of higher education, the College Savings Plans Network (CSPN) has compiled information and tips for people looking to give the gift of education.
· Do your homework: Nearly
all 529 plans have safe and convenient ways for friends and family to
contribute to established accounts. In addition, several commercial
websites 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 understand the
process as well.
· Go with what you know: 529
Plans make it easy for friends and family to contribute directly to a
student’s existing 529 account without involving a commercial service -
and with no additional cost. 529 Plans don’t charge a fee for gift
giving, provide the peace of mind of dealing directly with the plan, and
contribute the gift directly into a child’s account.
· Protect your child’s identity and safety:
If you use one of the commercial gifting websites, limit how much
information you share about the child online. Know how the gifting
service you use or register a child for will share that information.
Check how your private information will be used before you send photos,
birthdates and other personal information to an unknown entity.
· Read the fine print: Don’t
be misled when using a commercial gifting website. Know how long it
will take for a gift to reach the child, where the payment is held
before the gift is delivered, the safeguards the company has in place
for the funds, and who is the custodian of those funds. You never want
to send your money to an unknown entity.
· Understand the fees:
529 Plans do not charge fees to make gift contributions to their
accounts, but outside entities do. If it sounds too good to be true, it
might be. Understand how the fees are calculated and who will pay them.
For example, there may be no fee to buy a 529 gift card for $250, but
that card could cost a child $14.75 to use it.* Don’t be taken by
surprise after spending money with a gifting service.
· Follow Up: Once
you hit send on a gift contribution or drop it in the mail, be sure to
follow up. Check with the child’s family to ensure that they received
the contribution in their 529 account and that they know it came from
you.
· Have a family discussion:
Some gifting services allow you to contribute to a child’s education
even if they don’t have a 529 Plan set up. Make sure the parent or
legal guardian knows about your gift, and whether they need to take any
steps 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
the gift of education on their own.
· Take a break: Don’t
miss out on an opportunity to take a state income deduction or tax
credit for your 529 Plan contributions. Currently, 34 states and the
District of Columbia offer a state income tax deduction or state tax
credit for contributions to 529 Plans. Some even allow a deduction 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 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.
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