529 Plans in 2025: Why UHNW Families Should Use 529 Plans Before Tax Exemptions Sunset
By Brian Famigletti, Managing Director & Head of Marketing
Big Changes in Estate Planning
2025 is the year for high-net-worth families to focus on estate planning, specifically with 529 plans. Here’s why.
You might have heard about the lifetime gift tax exemption’s sunset. It’s an end to a provision in the 2017 Tax Cuts and Jobs Act, which significantly boosted the amount you could pass on to beneficiaries without paying estate taxes.
For individuals in 2025, a lifetime total of $13.99 million is eligible for exemption from inheritance tax ($27.98 million for couples). But unless the government acts, those figures will halve in 2026.
Here’s the good news: there are steps you can take today to make the most of that high exemption and protect your wealth. These include setting up irrevocable trusts, charitable giving, and maximizing your annual gift tax exclusions, including contributions to 529 plans, which offer distinct advantages.
Using 529 Plans to Transfer Wealth
529 plans are tax-advantaged educational investment accounts that allow contributions to be reported as gifts. Depending on the contribution amount, those gifts count toward a lifetime tax exemption, annual gift tax exclusion, or both.
If you have more than $27.98 million in your taxable estate, maximizing 529 plan contributions to your relatives is one way to reduce that figure. The annual gift tax exclusion for 2025 is $19,000 ($38,000 per couple) per beneficiary.
So, if a couple has eight grandchildren, they could gift $38,000 to each of them this year without filing a gift tax return or reducing their lifetime tax exemption. Putting the gifted money into a 529 plan helps ease their tax burden, since no tax is due on any investment gains or withdrawals (as long as the money is used for qualified education expenses).
529 Plans in 2025 and Beyond
New laws mean 529 plans can be used for broader educational costs. That includes up to $10,000 per year towards private elementary and high school tuition, apprenticeship costs, or student loan payments.
Here are a couple of other unique benefits of 529 plans:
Accelerated Gifting
529 plans qualify for something called accelerated gifting. You can put five years of contributions into your relatives’ 529 plans, all in one go. Considering the example above, that would mean a couple could gift $190,000 to each of their eight grandchildren’s 529 funds — without paying a cent in gift taxes.
Transferable Nature
If you’re worried your beneficiaries won’t be able to use everything in their 529 funds for educational purposes, there are other ways to access that money. You can set a new beneficiary (who must be a relative) twice a year. And you can now roll funds into a Roth IRA, as long as you meet certain requirements. The 529 must have existed for at least 15 years, for example.
529 contributions can be a powerful tax-advantaged way for high-net-worth families to pass wealth to future generations. They are one of several strategies to consider in the wider context of your comprehensive estate plan, especially with the tax exemptions sunset looming.
Need help building a tailored estate plan that’s right for your family and finances? Reach out to the advisors at Griffin Asset Management today.
Sources:
Saving For College: 6 Ways to Use Unspent 529 Funds (Without Causing Nonqualified Withdrawals)
IRS: Estate tax
IRS: 529 Plans: Questions and answers
College Access 529: Your Legacy: The Gift of Success
NY Times: Some Good FAFSA News: There’s a Loophole for Grandparents
