Summary

529 plans enjoy the best of both worlds in terms of income and wealth transfer tax mitigation. Due to their tax-exempt growth, 529 plans offer a highly effective use of a client's exclusions and exemptions. In the majority of situations, they are the most efficient vehicle for transferring wealth earmarked for education. In certain high-wealth situations, one can argue they also have a place as an inter-generational wealth transfer vehicle regardless of eventual use of the funds.

For families with taxable estates — particularly those in states with low estate tax thresholds — an estate planning attorney and CPA should be involved in structuring any strategy of this complexity.