Thank you so much for posting this.

Believe me, it isn't due to any extra wealth we have, but we are in a situation that we need to transfer some property or money to our children and this might be the way to do it.

ladytexan if your children are high school age or younger and you hope to have a chance for financial aid when they go off to college, you need to be careful what kind of accounts you set up for them. Children's assets in a 529 account will not be assessed nearly as high for financial aid as assets in a UTMA. Also, you can add up to $60,000 in a 529 at one time for each child (it's not limited by the gift tax exclusion amount).

>>Also, you can add up to $60,000 in a 529 at one time for each child (it's not limited by the gift tax exclusion amount).>>

Ummm....I'm not certain if this is correct. When I worked at a CFP's office, one of our very wealthy clients used 529's for each of his 5 grandkids to reduce his estate with a view towards estate taxes. The max he could put in was the $12K/yr limit with a 5-yr max carryforward for a total of $60K; e.g., no gifting from the estate for the next 5-yr period.

With the 2009 exclusion rising to $13K/hr, that would be a total $65K per each 529 plan, with no further estate gifting for the next 5 yrs.

You might want to consult with your tax advisor to confirm what applies best in your situation.

jkom you're correct, the $60,000 limits the opportunities for gifting in the following 4 years. The $60K max per 529 I referred to uses the 5-year election. You can elect to treat your $60,000 in 529 plan contributions as if they were made ratably over five years instead of all in one year. A husband and wife can gift a total of $120,000 per child in this manner in 2008, with the total rising to $130,000 if gifted in 2009. But as jkom notes, this must be included in planning for gifts in the future.

The interesting thing about 529s is that they can be set up for the benefit of anyone in the giver's family (son, daughter, grandchild, niece, spouse) and the designated beneficiary can be changed at any time.

Here is a link that might be useful: IRS Education rules

Thanks jkom51 for posting this it has been on my list of things to find out about for the last month. I will run it by our CPA. He set up a gifting plan several years ago to keep the estate tax under control. He usually gives us the amount to gift when we have our annual tax meeting but we may want to do something before that happens.

With the new administration who know how it will play out after 2010. I have read so many conflicting accounts as to what Obama will do. One said he will just let it go back to the 1 million exclusion and others have said he would set the exclusion at 5 million still others said 8 million. Does anyone out here have any information other than hearsay? Poor guy coming into the presidency with such a financial mess he probably hasnÂt figured it all out yet.

Mine are grown, and this may not apply. We are going to call the accountant and see what he says.

>>what Obama will do.I think you mean, what the Democratic Congress will do. I sincerely doubt Congress will jump whenever Obama tells them to. And that isn't the way he tends to operate anyway. He's a consensus builder, which is pretty evident from the people he's picking for his political team.

It would be politically unpopular to allow the estate tax in 2011 to lapse back to its old $800K limit. Inflation alone would demand a resetting upwards. The best guess by most analysts is that it will be compromised to a level between the $3M to $5M figure.

Unless everything our CPA has told us for the past 8 years is incorrect if congress does nothing the estate tax goes back to a 1 million exemption in 2011.

The reason I said Obama is no matter what congress dose he will have to sign it. He said today he will more than likely just let the Bush tax cuts run out in 2010. Several reports have said he will set the exemption after it runs out at 3.5 million with the current tax rate at 45% for amounts over that. That would give a couple a 7million exemption if set up properly within their estate plan.

BTW, people should be aware if they plan to pass money to their grandchildren, skipping their children's generation, there is a heavy tax penalty for doing so UNLESS a trust is properly set up. Consult a qualified estate attorney for details when planning this type of arrangement - or indeed, any type of trust designed to reduce estate taxes when you believe you are anywhere close to the Federal estate tax limits, no matter how they change in the future.

thanks a lot for your post!