Superfunding a 529 College Account

529 College Savings Plans are tax-advantaged education-savings accounts.  Federal tax rules allow an account owner to give up to $15,000 a year ($30,000 for married couples) to a child without incurring a gift tax. However, there is a unique provision to employ a “superfunding” strategy by front-loading your 529 contributions without triggering gift taxes. Here’s how superfunding works:

By employing the superfund strategy, you can put six years of contributions ($75,000 for single or $150,000 for a married couple) into your 529 accounts in one year by electing to treat the contribution as if it were made in equal installments over five years.

If you want to use the superfund strategy, in only a few months you can contribute $90,000 ($180,000 for a married couple) to the 529 account tax-free:

  • Make a one-year gift to the beneficiary using the allowance of $15,000 by the end of this tax calendar year (2020).
  • Utilize the 5-year gift allowance of $75,000 at the start of the next tax calendar year (2021).

You would need to note this on IRS Form 709. Any additional contributions from the account owner above this amount to the beneficiary during the five-year period would trigger gift taxes. Although such contributions are considered completed gifts, the account owner retains control of those contributions—and the account balance is not included as part of his or her estate.

Check out our webinar “A Definitive Guide for Education Planning” to learn about the best ways to save for college.

Announcing our Money Mastery webinar series

After great reviews from our Summer Webinar Series, we are pleased to announce a complimentary follow-up slated for the rest of September (kicking off next week, September 15th, at 3:30 PM PDT) – this time focusing on financial literacy, and meant for those in their teenage years through mid-career. While a great program to watch on your own, for those with children this entire series is geared to bring them in to watch with you, hopefully sparking conversations around money habits and education planning.

Each session will be approximately 30 minutes, with interactive polling for those logged in on the computer, followed by a live Q&A session.

Below are the dates and times for the webinar and click on the links to register:

September 15th at 3:30 PM PDT – Connecting the Dots to Your Financial Future (Part 1)

September 22nd at 3:30 PM PDT – Connecting the Dots to Your Financial Future (Part 2)

September 29th at 3:30 PM PDT – A Definitive Guide for Education Planning