The 529 Playbook: From College Savings Tax Breaks to Legacy Planning
When it comes to saving for education, a 529 plan offers flexibility, potential tax benefits, and features designed for long-term planning. While often associated with college savings, 529 plans may also provide strategic opportunities beyond tuition, including ways to optimize tax outcomes and incorporate education funding into broader estate planning goals.
We’ve asked our advisors to share their expertise on 529 plans, from getting started, to making the most of tax advantages, to keeping your plan flexible for life’s changes.
What Exactly Is a 529 Plan?
A 529 plan is an education savings account that offers tax advantages when used for qualified expenses. It’s most often associated with saving for college, but it can also be used for certain K–12 expenses and even for some types of graduate or vocational training.
Unlike typical irrevocable trusts, a 529 plan allows you to retain control of the funds while still enjoying tax benefits, making it an appealing choice for many families.
Watch Scott Hohman’s video to hear more about how a 529 works and why it might be a smart starting point for your education funding strategy. There’s also a super-fund opportunity coming soon that Scott covers in his video:
Once you’ve opened a 529, the earlier you contribute, the better. Money in a 529 grows tax-free, so starting when your child is young allows compound growth to work in your favor. Even modest early contributions can grow significantly over time.
Another key early decision is your investment strategy. Age-based portfolios are a popular choice. They automatically adjust the mix of investments to become more conservative as your child gets closer to college age, reducing risk as tuition bills near.
Maximizing Tax Benefits
The 529’s tax advantages are one of its biggest draws, but the rules vary by state and can be combined with federal credits for even more savings.
In Ohio, for example, you can deduct a certain amount of 529 contributions per beneficiary each year from your state income taxes, a benefit worth factoring into your annual contribution plan.
Federal tax credits can also come into play. The American Opportunity Tax Credit (AOTC) offers up to $2,500 per eligible student for qualified higher education expenses, but there are rules for how to coordinate this with 529 withdrawals so you don’t accidentally disqualify yourself.
Ryan Geary walks through how you can pair AOTC with your 529 withdrawals for the biggest combined benefit:
Read more about this strategy in Ryan’s article, “Helping Clients Maximize Education Savings: 529 Plans and the AOTC.”
You can also think strategically about when you contribute. Some families make their contributions in the second half of the year to align with income or tax planning goals. Others opt to front-load the account—making a large lump-sum contribution early in a child’s life—to take full advantage of compound growth over many years.
Beau Bryant walks through timing strategies for 529 investments, including how to decide whether a lump sum or periodic contributions make the most sense for your situation, in this article and the video below:
Flexibility of 529s and How to Avoid Pitfalls
Life rarely unfolds exactly as planned, and your 529 strategy should be able to adapt.
What if your child earns a scholarship? What if you want to change the beneficiary? What if the funds aren’t needed for education at all?
Thanks to recent updates like Secure Act 2.0, you now have more options than ever. Unused funds can sometimes be used to pay student loans, rolled over to another family member’s 529, applied to K–12 tuition, or even transferred to a Roth IRA under certain conditions.
That flexibility can protect you from one of the biggest fears people have about 529s: overfunding the account.
There are still pitfalls to watch for, such as misunderstanding what counts as a qualified expense or locking into an investment mix that doesn’t fit your needs. Brayden Thomas talks about the most common 529 mistakes he sees and how to keep your plan nimble as your needs evolve:
Beyond College: Strategic Uses of 529s in Estate Planning
While 529s are most often discussed in the context of paying for college, they can also play a role in legacy planning.
Because contributions are considered gifts for tax purposes, 529s can be a way to reduce your taxable estate while still retaining control over the funds. They can be particularly appealing when compared to more rigid structures like irrevocable trusts.
A well-planned 529 strategy can help you support not only children, but also grandchildren or other family members.
Scott shares more in his article, “Beyond Tuition: The 529 Plan As a Family Stewardship Tool.”
The Power of a 529 Plan
A 529 plan is most powerful when it’s not an afterthought, but an integrated part of your broader financial strategy.
That means coordinating contributions with your tax planning, aligning investment choices with your time horizon, and knowing your options if circumstances change. Whether your goal is to cover tuition or support education for future generations, a 529 plan can offer flexibility and potential benefits when aligned with your overall strategy.
The best results often come from combining multiple perspectives—tax, timing, flexibility, and estate considerations—into one cohesive plan.
Schedule a call with Resolute Wealth Advisor to discuss how to maximize the benefits of a 529 as part of your portfolio.