If there is money left over in a 529 plan it can turn into a great estate planning tool. Two benefits of 529 plans are that they can be transferred to family members and there is no time frame when the funds have to be used. Because this money can grow tax-free for many years it can create generational wealth. Here is an example how.
As an example let’s say you start a 529 plan when your son or daughter is born and over the years you keep contributing to the account. When your son or daughter turns 18 you have roughly $250,000 in the account. Your son however decides to join the circus instead of going to college. There are no other family members who can use the 529 funds. You think you may have penalties to pay and a huge tax bill, because the 529 will not be used for education expenses. Contrarily, you may be able to use that 529 plan to finance all of your grand kids education. Let’s say by the time your son, the trapeze artist hits 30 he has two kids. By the time your two grand kids are ready for college that $250,000 will have 30 years to grow tax free. At a 7% return you are looking at a value of over $2,000,000.
In 30 years time 4 years of college may cost $1,000,000 dollars, but at least you will be one of the few people that has the money saved to be able to afford it.