Giving the Gift of Education with the NC 529 Plan

It's easier than ever to send a gift to a child's 529 plan.

Tuesday, February 14, 2023

"It Takes a Village" isn't just an ancient proverb. It's especially true when investing in a child's education. Although most parents start planning for their child's future early on, it's still challenging to save up enough money to cover all education costs. The NC 529 Plan makes it easy for parents to rely on their village to support their child's educational goals.

Friends and Family Can Easily Contribute

Does asking your loved ones to contribute financially to your child's education make you uncomfortable? It shouldn't! In fact, a new survey found that nearly half of the parents planned to ask grandparents, other family, and friends for a contribution to their child's education savings plan when celebrating a birthday or holiday. It just makes sense. Toys and clothes are wonderful gifts, but an education is something they'll never outgrow! New gifting options make it easier than ever to donate to a child's K-12 or college education.

Crowdfunding Education

Crowdfunding began with entrepreneurs, but it has evolved into a popular way to fund almost anything, including a child's education. Small donations from family and friends can really add up over time.

The NC 529 Plan is proud to debut a new gifting enhancement, supported by a crowdfunding platform that makes it easy for anyone to contribute to a loved one's NC 529 Account. Thanks to the integration with Backer, a best-in-class fintech company, NC 529 Participants can use new gifting links to allow grandparents, aunts and uncles, extended family, and friends to become "backers" for a child's education. Backer-powered gifting pages link NC 529 Accounts directly to friends and family so they can easily give one-time gifts for birthdays and holidays or set up regular contributions to a child's account.

"The new gifting links make it so much simpler for friends and family to contribute to an NC 529 Account," said Laura Morgan, Vice President of Communications, Savings, and Legal Affairs at College Foundation, Inc. (CFI). "To get started, NC 529 Participants simply log in to their account and click the "Take me to Gifting" button to receive a link to email or text to friends and family. Then friends and family can contribute via bank draft, credit card, Google Pay, or Apple Pay. We're very excited about this new functionality to support families as they save for K-12 and college expenses."

Tax Benefits & Flexibility

Making it convenient to save for education isn't the only benefit of the NC 529 Plan; there are also tax advantages. The earnings that grow in an NC 529 Account are tax-exempt when used to pay for qualified education expenses. This means you won't have to pay taxes on the money you withdraw when it pays for a student's college room and board, tuition, trade schools, student loan payments, K-12 tuition, and more.

"The tax advantages of the NC 529 Plan to save for education make this a powerful tool for parents to prepare for the future," said Morgan. "And thanks to the changes in the SECURE 2.0 Act, starting in 2024, unused 529 contributions can be rolled over into a Roth IRA, providing comfort to families who are concerned about planning for education as well as retirement. The new rules provide so much more flexibility."

Generous Gifting Limits

Grandparents are major contributors to NC 529 Accounts and often wonder how much they can give for each grandchild. While there are no limits to the amount that may be gifted, some families may be concerned about gift taxes. In 2023, grandparents and other loved ones can individually contribute up to $17,000 per beneficiary per year, and married couples can contribute $34,000 jointly to each beneficiary per year before gift tax limits are triggered.

This means if an individual grandparent has four grandchildren, they can give up to $68,000 ($17,000 per child) within the gift tax limits. It's important to remember that gift taxes are not just for 529 contributions. The annual gift tax exclusion also includes non-529 gifts, such as property and other cash gifts.

$17,000 a year is a lot of money and can help grow a child's education savings account quickly, but most families are likely to budget smaller contributions, and every little bit counts! NC 529 Plan contributions start at just $25, making it the perfect gift for any budget. There are also no deadlines for gift contributions.

"A contribution to a child's education is really a one-size-fits-all option," said Morgan. "We always tell families that it's never too early or too late to start saving for education and make a lasting impact on a child."

College is Right Around the Corner!

Children grow up so fast. It can feel like the years are flying by, and you're trying to savor each moment. Before you know it, your little ones won't be so little, and they'll need a quality education to kick-start their future. Don't be afraid to ask friends and family to invest in their education so they can blossom into the brilliant minds of the future.

"Supporting a child's future is a priceless gift," said Morgan. "The NC 529 Plan is honored to help families on that journey."