529s and your high-net-worth clients

Learn about CollegeBound 529

Many high-net-worth investors may not think 529 college savings plans apply to them, especially if they can afford to pay for college expenses as they occur. But these investors could be missing out on the benefits of a powerful saving strategy unique to 529 plans called "accelerated gifting" or "superfunding."

Superfunding accelerates gifting

  • In a 529 plan, couples filing jointly can gift $150,000 in one year ($75,000 for a single filer) and prorate that gift over five years without triggering the annual gift tax over that time period.1
  • This strategy can be applied to each beneficiary and repeated every five years up to plan contribution limits. Invesco's CollegeBound 529 plan has a maximum contribution limit of $395,500.
  • Superfunding maximizes compounding, and a large one-time contribution could potentially result in a larger pool of money over time versus an annual savings strategy over that same time period.

The interactive chart below compares one-time superfunding versus an annual savings strategy.

Accounts with a one-time contribution of $150,000 could potentially earn up to 34% more over 18 years than the same amount contributed annually over that time period, based on a 7% return.

Source: Invesco. This hypothetical example and estimate of an 7% average annual total return is for illustrative purposes only and is not intended to represent the actual performance of any particular investment product or real investor. Your actual return isn't likely to be constant from year to year, and there is no guarantee that a specific rate or return will be achieved.

A tax-efficient way to help clients protect and grow their wealth for future generations

Superfunding reduces estate taxes

Superfunding can also help clients move assets out of large estates and reduce the size of these taxable estates during their lifetimes.2 In the case of clients establishing 529 plans for multiple beneficiaries, this could help reduce future estate taxes significantly. This strategy may also ease intergenerational wealth transfer. Investors should consult with their tax and estate planning professionals to understand their specific situations.

Learn the advantages of CollegeBound 529.

Source: Invesco Distributors, as of June 2018

1 For 2018, a couple filing jointly can gift up to $30,000 per beneficiary before triggering the annual gift tax ($15,000 if filing single).

2 Any contributions made to a 529 plan are considered "completed gifts" by the IRS, and are immediately removed from the account owner's estate, even though they still control the money.