Contributions to your 529 plans are considered “completed gifts” to the beneficiary.
This federal rule means the current 529 assets and all future earnings are excluded from the owner’s taxable estate. As the account owner, you can still name and change account beneficiaries, choose investments, and control all withdrawals. Because the owner remains in control of the account, this is a unique feature among gifting strategies. The account value will instead be included in the estate of the designated 529 account beneficiary.
As an added bonus, 12 states and the District of Columbia (including Oregon up to 16% if the estate is over $1,000,000 and Washington up to 35% over $3,000,000) charge their additional state estate taxes. There are no state estate taxes on the 529 assets.
At the time of her death in 2026, Emily from Washington state owned a home worth $7 million, retirement accounts of $4.5 million, stock worth $2 million, and bank accounts of $1.25 million. She had also contributed a total of $500,000 to 529 accounts for several grandchildren. Because that $500,000 is exempt from estate tax, her taxable estate is $14.75 million rather than $15.25 million–keeping her just below the $15 million federal exemption threshold. This mean her estate owes no federal estate tax and significantly less state estate tax.
No statement or example on this site should be considered a specific recommendation for your personal situation. Investing and tax strategies each carry significant risks. Examples herein may not apply to your situation. Please consult your estate attorney, tax advisor, or financial advisor for personal advice.