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The Magic Bank Account
October 26, 2018
An Overview of Social Security
December 5, 2018
Published by Richard K. Abraham, Esquire on November 20, 2018
Categories
  • Estate Planning
Tags
  • Beneficiary
  • Estate Plan
  • Estate Planning
  • Family

While experts have and will continue to debate the benefits and costs of the 2017 tax reform for consumers, one clear benefit is the expansion of benefits from the use of a 529 Education Savings Account.

A 529 savings plan is when money is deposited into an account with a named beneficiary and the income and gains are tax free.

Distribution of principal or earnings from the account, so long as the money is spent on a qualified educational expense, is also tax free. Distributions for other expenses can be made but the earnings will be taxed, and the recipient will likely face a 10% tax penalty.

Previously funds from a 529 plan could only be used to pay expenses for post-secondary education.


However, after the Tax Cuts and Jobs Act of 2017, $10,000 of tuition can now be paid per year for an individual student in grades K-12 from a 529 account.

In some states the benefit is also more than an increased opportunity to save and help provide for the education of younger family members. While there are no federal tax deductions for contributions to a 529 plan, over 30 states allow some form of deduction or offer another benefit such as a tax credit.


Maryland parents can deduct up to $2,500 each year per account or beneficiary from their state income taxes depending on how their plans are structured.

Under the new law, residents of these states would be foolish not to take advantage of the plans.

Many parents and grandparents have opened accounts naming a younger family member the beneficiary, contributed to the account up to the state benefit limit, and made distributions in the amount deposited or of full tuition.


In effect, they are getting a tax break for using a savings account to pay their children’s tuition.

In Maryland, yearly contributions of up to $2,500 for an individual or $5,000 for a married couple are deductible from state taxable income.

However, these benefits have led to extreme growth in the popularity and use of 529 Education Savings Accounts to the point where many states are examining changes to their deductions or covered expenses to meet the increased funding demands.


If you plan on taking advantage of these benefits it would be wise to act sooner rather than later.


For help planning for the future education of your children or any other estate planning matters contact Abraham & Bauer today.

Planning ahead is a gift to your loved ones!

Richard K. Abraham, Esquire
Richard K. Abraham, Esquire

Mr. Abraham is an experienced attorney and founding member of the Law Firm of Abraham & Bauer. The Towson, MD office of the firm concentrates its practice in Estate Planning, Elder Law, Probate, Medical Assistance (Medicaid), Guardianship, Asset Preservation and Fiduciary Representation.

He is an active member in a number of professional organizations that focus on law, the senior community, and estate planning. He works with clients in Central Maryland, especially in Towson, Hunt Valley, Lutherville/Timonium, Parkville, White Marsh, Bel Air & Northern Baltimore City.

Schedule a consultation to help you and your loved ones.

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Richard K. Abraham, Esquire
Mr. Abraham is an experienced attorney and founding member of the Law Firm of Abraham & Bauer. The Towson, MD office of the firm concentrates its practice in Estate Planning, Elder Law, Probate, Medical Assistance (Medicaid), Guardianship, Asset Preservation and Fiduciary Representation. He is an active member in a number of professional organizations that focus on law, the senior community, and estate planning. He works with clients in Central Maryland, especially in Towson, Hunt Valley, Lutherville/Timonium, Parkville, White Marsh, Bel Air & Northern Baltimore City. Schedule a consultation to help you and your loved ones.

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