“Superfunding” is a term sometimes used to describe large 529 plan contributions using 5-year gift tax averaging described in section 529(c)(2)(B) of the Internal Revenue Code. It can be a great way to jumpstart a child’s or grandchild’s college savings account.

What happens if you open a 529 and don’t go to college?

If you have a 529 college savings plan and your child is not planning to attend college, don’t panic! In most cases, withdrawals from a 529 plan that are not for qualified educational expenses are subject to a 10% penalty and taxes on earnings.

How do I set up a 529 plan for my grandchild?

If you’re planning to invest in a grandchild’s 529 plan, there are 2 ways to contribute. You can: Add money to an existing account. Often the child’s parents open the account and give others the option of adding to it.

When do you have to Superfund a 529 plan?

You have spare cash and are a busy person who wants to get the 529 plan contributions out of the way. Once you contribute $75,000 you can’t contribute without penalty for five years. Superfunding is like saving yourself five years of thinking about saving for your child’s education.

Are there any new regulations for 529 savings plans?

WASHINGTON — The Internal Revenue Service and Department of the Treasury today announced their intent to issue regulations on three recent tax law changes affecting popular 529 education savings plans PDF.

Is there a 5 year gift tax on 529 plans?

Tax law allows 5-year gift tax averaging only for gifting that involves 529 plans (and in rare situations, Coverdell education savings accounts). Here are a few rules and tips to keep in mind when considering superfunding a 529 plan.

How much can you contribute to a 529 plan at one time?

According to San Diego financial planner Taylor Schulte “superfunding” a 529 college savings account allows you to make five years of contributions at one time while still qualifying for the annual gift tax exclusion. “For example, in 2019, the annual gift tax exclusion is $15,000 per individual,” he says.