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Financial Planning / Tax Strategies
|Subject: Re: 5-Year Accelerated Gift for 529 Plan||Date: 12/11/2005 10:43 AM|
|Author: wintbill||Number: 81865 of 122300|
My Question: If we give $70,000 this year and $40,000 next year, does the 5-year clock "reset"? In other words, if we do it this way, is it actually 6 years from now before we could give again?
Each gift into the 529 plan has its own 5-year period applied. More importantly, the aggregate of annual gifts cannot exceed the gift tax annual exclusion.
Assuming your gift of $70,000 is made in 2005, it will be treated as a gift of $14,000 for each year spread over 2005 through 2009.
Then assuming you make a gift of $40,000 in 2006, it will be treated as a gift of $8,000 for each year spread over 2006 through 2010. However, you must check that the aggregate of gifts does not exceed the annual exclusion (currently $11,000 per individual per donor for 2005, so $22,000 to your son's 529 plan is allowed as a gift from both you and your spouse). Your gift of $14,000 starting in 2005 combined with your gift of $8,000 starting in 2006 will total $22,000, below the annual gift exclusion.
The annual exclusion increases to $12,000 in 2006, so a total of $24,000 can be contributed to your child's plan by you and your spouse. As your assumed gift of $22,000 will be below the exclusion for 2006, you and your spouse will be eligible to contribute an additional $2,000 to the 529 plan if you wish.
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