Build Your Business

Learn how CollegeBound 529 may be a great plan for grandparents, high-net-worth clients, and for employers — all while gaining insight into incorporating 529 plans into your business practice.

Asset transfer

Reach out to grandparents as they can help save for their grandchildren's higher education.

High-net-worth clients

Many high-net-worth investors may not think 529 college savings plans apply to them. But these investors could be missing out on the potential benefits of a powerful saving strategy unique to 529 plans called "accelerated gifting" or "superfunding."

Engage employers

As employee benefit costs rise, HR departments are looking for ideas that can help employees with little-to-no cost to the company. More companies are viewing college savings benefits as part of the overall financial well-being of their employees.

FAQ

How can 529 plans potentially help me build my practice?

529 college savings plans allow you to offer an expanded lineup of services to help meet your clients' needs in three ways:

  1. Expand client relationships – 529s are a great entryway into estate planning and generational wealth transfer conversations as well as a gift idea.
  2. Deepen family connections – If your clients have children or grandchildren, talk to them about funding a 529 plan and start a conversation about which other relatives may want to contribute, which may lead to referrals.
  3. Grow relationships with business owner clients – With benefits costs on the rise, a 529 plan is a great low-cost and paperless benefit the company can offer to its employees.

Advisor tool: Growing your business with corporate plans

Should my client consider a 529 to help her grandchild pay for college?

If your client has the means to consider a "living legacy" to her grandchild, I can think of at least three reasons she may find a 529 college savings plan a good option.

  1. Control – As the 529 account owner, your client controls the assets. Not the grandchild. This helps to ensure that the savings are used for educational purposes.
  2. Flexibility – In addition to the traditional public and private four-year universities, there's a huge selection of eligible post-secondary institutions the beneficiary can choose from, including trade and vocational schools, community colleges, graduate programs, foreign institutions and online programs. Also flexibility in the sense that the grandparent has control over any remaining funds. If there are funds left in the 529 after the beneficiary graduates, or if the beneficiary doesn't use them, the owner can designate another beneficiary without tax consequences.
  3. Taxes – 529 plans offer several potential tax breaks; details available at CollegeBound529.com

For most of us, grandparents are the human link to our past and our heritage. With 529 college savings plans, grandparents have an opportunity to become an important link to their grandchildren's future while benefiting from the financial incentives 529s offer.

Advisor tool: 529 Grandparent flyer

Can my client utilize required minimum distributions (RMDs) for 529 plans?

Yes. If you have a client that is over 70½ that does not need all or part of their required minimum distribution, they have the ability to fund a 529 savings account. The potential advantages to this are:

  1. Tax-free earnings and compounding – Using RMDs to fund a 529 allows earnings to grow and compound tax-free.1
  2. Students obtain more federal financial aid – Grandparent-owned 529's are not included in the federal financial aid asset calculations since determination is limited to the income and assets of both student and parents. Distributions from the grandparent-owned 529 will count as student income for the financial aid determination for the year following the distribution.
  3. Maintain ownership flexibility – You can establish 529 accounts for multiple children and divide your RMDs between them or change the beneficiary and retain the tax benefits.
  4. Nearly all retirement accounts are subject to the RMD rule, including IRAs, 401(k), 403(b) and 457(b) accounts and Keogh plans. So if your client does not need all or part of their RMDs, consider using that money to fund a 529 account. It is truly the gift that keeps on giving, helping to provide a successful future for younger family members.

Advisor tool: Putting your RMDs to work flyer

Can my client use a 529 plan for K-12 costs?

As a result of the Tax Cuts and Jobs Act, 529 savings plans aren't just for college expenses anymore.

Families with children in grades K-12 can now take federal tax-free withdrawals1 of up to $10,000 per year to pay for public, private, religious elementary or secondary school tuition. However, whether K-12 tuition will qualify for state tax benefits is still being determined on a state-by-state basis.

Advisor Tool: Using a 529 plan for K-12 costs flyer

Learn more about CollegeBound 529 on our new product microsite.

None of the State of Rhode Island, its agencies, Invesco Distributors, Inc., Ascensus College Savings Recordkeeping Services, LLC, nor any of their applicable affiliates provide legal or tax advice. This information is provided for general educational purposes only and is not to be considered legal or tax advice. Investors should consult with their legal or tax advisors for personalized assistance, including information regarding any specific state law requirements.

1 Earnings on non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements and certain withdrawals are subject to federal, state, and local taxes.