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HARVARD, YALE, OR YOUR LOCAL COMMUNITY COLLEGE

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Some programs may have a limit on the amount of money that can go into a 529 over the lifetime of the account, which is usually around $250,000. But that shouldn’t be a deterrent to utilizing a 529 plan.

EXAMPLE:

Billy will be attending college in seven years. His parents establish a 529 plan for him, to which his grandparents wish to contribute. They invest $110,000 in Billy’s 529 plan with- out having to pay any gift tax. How?

$110,000 2 = $55,000 Each grandparent gifts $55,000 to Billy’s 529 plan. $55,000 5 = $11,000

Since the maximum gift without triggering gift tax is $11,000, the $55,000 from each grandparent becomes a five-year gift. They will not be able to give any more money to Billy until the five-year time period has elapsed. At that time, they can give Billy more money if they want.

Besides the tax-deferred growth and tax-free distributions, another case for investing in a 529 is that it doesn’t discriminate against the wealthy. This is particularly important because children of wealthy parents are less likely to receive financial aid and grants for college. Unlike the education IRA, which has limits on the adjusted gross income of the donor, the 529s have no preset income limits. Any person with any amount of income can give money to a 529 plan for education purposes.

There are times when colleges and universities fail to account for the fact that parents may not be helping their child currently pay for college. Let’s assume that Jim is 18 years old and will be attending

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