The Estate Planner - March/April 2020

Creating an education legacy -

For many people, an important goal of estate planning is to leave a legacy for their children, grandchildren and future generations. And what better way to do that than to help provide for their educational needs? A 529 plan can be a highly effective tool for funding tuition and other educational expenses on a tax-advantaged basis. But when the plan’s owner (typically a parent or grandparent) dies, there’s no guarantee that subsequent owners will continue to use it to fulfill the original owner’s vision.

To create a family education fund that lives on for generations, a carefully designed trust may be the best solution. But trusts have a significant drawback: Unlike 529 plans, the earnings of which are tax exempt if used for qualified education expenses, trusts are subject to some of the highest federal income tax rates in the tax code. In 2020, for example, trust income is generally taxed at the highest individual rate — 37% for ordinary income and 23.8% (including the 3.8% Net Investment Income Tax) for capital gains and qualified dividends — after the amount exceeds $12,950.

Please see full Newsletter below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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