Maria Malloy, CFP®, details the ways in which we support clients when grieving the loss of their spouse.
Giving before You Are Gone: Clever Ways to Distribute Wealth
For a long time, putting your estate in order and planning your legacy was a straightforward process. You wrote out a will, named your survivors, and detailed who would receive what when you passed.
These days, there are new ideas around how wealth is transferred, including distributing the funds while the benefactor is still alive and able to witness the ripple effects of their gift(s). Here are a few examples of creative ways to share your wealth with your loved ones and charitable causes now or in the immediate future.
Give Generously – and Tax Free
The IRS allows individuals to give up to $19,000 per recipient (in 2025) each year without triggering gift taxes. That means a couple could jointly give $38,000 per recipient per year. This is a smart way to gradually transfer wealth to children, grandchildren, or even friends, without eating into your lifetime gift and estate tax exemption. Some savers opt for an annual gifting strategy where they help pay for a loved one’s tuition, down payment or other savings, all while reducing their taxable estate.
Pay Directly for Medical Expenses or Tuition
Instead of giving cash, you can pay tuition or medical bills directly on someone’s behalf. These payments aren’t subject to gift tax limits, no matter how large. It’s a stealthy, IRS-approved way to support someone you love without affecting your annual gift limit.
Set Up a Donor-Advised Fund (DAF)
While not new, donor-advised funds are being used in new and creative ways. A donor-advised fund is like a charitable investment account. You contribute cash, stocks, or other assets, get an immediate tax deduction, and then recommend grants over time to your favorite charities. A donor-advised fund could be co-managed by parents and children and centered around the values and philanthropic efforts dear to them.
Start a Legacy Business or Family Foundation
If you want to blend entrepreneurship, family, and philanthropy, consider starting a small business or foundation with your loved ones. It could be a scholarship fund, a nonprofit, or a community initiative. Involve your children early so they can help shape the mission and be inspired to carry it forward.
Establish a Family Trust or Living Trust
A trust allows you to control how your wealth is distributed, both while you’re alive and after. A revocable living trust lets you maintain control of your assets and smoothly pass them to heirs without going through probate. You can also set conditions – like age restrictions or purpose-based use (education, housing, etc.) around the funds. Additionally, an irrevocable trust may be used to remove assets from your estate, potentially lowering estate taxes and protecting wealth from creditors.
Gift-Appreciated Assets
Rather than selling appreciated stocks and paying capital gains tax, gift them directly to loved ones in lower tax brackets or donate them to charity. Charities can sell these assets tax-free, and you get a full-value deduction. Family members who receive the assets may also benefit from a stepped-up cost basis if they inherit it, but that benefit doesn’t apply to lifetime gifts, so remember that timing is crucial.
Invest in Life Experiences, Not Just Inheritance
Sometimes the best gift isn’t cash, it’s shared experience. Use your wealth to fund family travel, multi-generational events, or special experiences that create lasting memories. These are hard to replicate and deepen emotional bonds. Better yet, frame these experiences as value-based with a visit to a place connected to your family history or by volunteering together as part of a trip abroad.
Make Loans with Forgiveness in Mind
You can make intra-family loans at below-market interest rates. If structured correctly, they can fund a loved one’s home, education, or business venture. You can then forgive these loans over time within gift tax limits which essentially makes a loan into a gift gradually.
Talk About It Early
The biggest financial gift you can give is clarity. Don’t keep your wealth plans a secret. In many cases, adult children are not inheriting as much as they think they will. Talk with your family about your intentions, your values, and how you want your money to reflect both sides of the coin. These frank conversations may prevent future disputes and may also help them to understand you and carry your legacy forward with perspective and wisdom.
Parting Thoughts: Give While it Matters Most
Distributing wealth before you’re old or gone isn’t just about smart tax planning, it’s about living generously. You can see the results of your giving, help your loved ones avoid stress, and bring more purpose to your financial decisions. Whether it’s helping your child buy their first home, funding your grandchild’s tuition, or expanding a charity’s impact, you get to be part of that story now.
15 Things to Know about College Savings Plans (with Special Oregon 529 Plan Tips)
The 529 Plan is the most popular college savings plan available. We have identified 15 things you should know in order to get the most out of a 529 Plan, with a focus on Oregon 529 Plans.
1. What Is a 529 Plan?
A 529 plan is state-sponsored investment program to help families save for college tax-free.
There are two types of 529 plans:
529 Education Savings Plans
These plans work like a 401(k) in that your savings can be invested in stock or bond mutual funds and any earnings grow tax-free. Educational expenses such as tuition, room and board, supplies, and even computers can be paid using these funds. 529 College Savings Plans are the most common type of plan, and the money can be used for schools in any state. Thinking about college overseas? 529 College Savings Plan can be used with some international schools as well.
529 Prepaid Tuition Plans
Fourteen states have 529 Prepaid Tuition Plans (Oregon does not). With a prepaid tuition plan, you can prepay all or part of an in-state public college education. The benefit is that you can lock in tuition at today’s rates, however, you must be sure that your child will be attending a public, in-state university for this to be a good option.
2. Why Use a 529 Plan over Other Plans?
There are three reasons to opt for a 529 plan for education savings:
Tax-free investment growth and withdrawals
There are no federal income tax benefits associated with a 529 plan contribution. However, your investment grows tax-deferred and qualified withdrawals are federally tax-free and state tax exempt as long as they are used for qualified education expenses.
State tax benefits
Thirty-four states offer tax deductions or credits on contributions to 529 plans, including Oregon. Click here to see the tax benefits associated with the Oregon 529 College Savings Plan.
Estate planning
The unique advantage to 529 plans is that the value is transferred out of your estate, yet you retain full control over the account as an owner. This can be an important estate planning tool for grandparents who are looking to reduce their estate taxes at death.
3. When Should I Open a 529 Plan?
We recommend you begin saving as early as possible as tax-free, compounding investment returns are powerful. Investing $100 a month from birth will give your child $43,000 for college, assuming a 7% rate of return. If you were to start saving when your child is 10, that number drops to less than $13,000.
4. What Kind of Investments Are Available?
529 plans are invested in a portfolio of mutual or index funds and they are managed by the state or an outside manager such as Fidelity, TD Ameritrade, Vanguard and many others.
5. Shop Around and Pay Attention to Fees
Depending on the investment manager, fees can vary according to the type of investment funds the manager uses. The fees may include advisor fees, program management fees, maintenance fees, and investment manager expense fees. Some states offer low-cost index funds and other states only offer actively managed mutual funds, so it pays to shop around, especially if your state does not offer a state tax deduction for contributions. State plans can be opened in most other states, and you can roll a 529 plan to a different state once every 12-month period, with some exceptions Additionally, some states and program managers may offer incentives in the form of a fee waiver if you opt to fund your account with direct deposit.
6. Two Primary 529 Investment Strategies
There are two types of 529 plan investment strategies: age-based or static funds.
Age-based, or target date funds
Age-based or target date plans automatically adjust your asset mix toward a more conservative allocation as your student approaches college age. This means that you start with a higher allocation to stocks when your child is younger and, by the time they reach college age, the assets are more heavily invested in cash and bonds. Using this type of automatic adjustment may be right for you if you do not have the time or knowledge to manually adjust the account’s asset mix. It’s important to note that these age-based shifts from aggressive to conservative may not happen fast enough if the market hits a period of volatility.
Static funds
The “static” option means that you hold an investment fund or portfolio of funds that maintain the same allocations over time.
7. Custodial Account
A 529 account is managed by a program manager: either the state or a third-party investment firm. The funds are held in a custodial account, meaning that your money is protected even if the state or third-party has financial issues.
8. The Investment Strategy Is Important
Diversification is an important risk management tool. Most 529 plans offer an investment strategy using U.S. stocks and bonds as well as international investments. Make sure you fully understand the specific investment options and their associated risks.
9. Private School Tuition Now Allowed
There have been several changes to college savings plans in recent years, including tax-free withdrawals for private, public and religious school tuition, up to $10,000 per year (formerly used to be $10,000 total). However, not all states recognize this benefit so some withdrawals could be taxed at the state level.
10. Understand the Basic Rules
- Both state and federal rules apply to 529 Plans.
- There can only be one owner and one beneficiary for a 529 account.
- You can own more than one 529 account.
- The student can be a beneficiary of more than one 529 account as long as the aggregate contributions don’t surpass the state’s account size limit. This limit varies by state and ranges from $235,000 to $575,000.
- Anyone can contribute to a 529 Plan account, not just a parent.
- The account owner may change the beneficiary, and some states permit the account owners to name a contingent beneficiary.
- Some states allow the account ownership to transfer to the beneficiary in the event the account owner dies.
- Plan holders may roll over $35,000 per beneficiary to a Roth IRA if the 529 plan is overfunded. Contributions in excess of $19,000 for single filers and $38,000 for couples filing jointly may be subject to gift taxes.
- Be sure to consult your tax advisor to make sure you have not exceeded the annual gift tax exclusion limits.
- For non-qualified withdrawals, earnings are subject to federal income tax and a 10% penalty.
11. Does the 529 Plan Affect My Financial Aid Options?
In general, 529s have a minimal impact on financial aid, but it depends on if the account is owned by the parent, grandparent or student. Broadly speaking, parent-owned 529 Plan accounts are treated favorably by the federal financial aid eligibility formula (maximum 5.64% rate) as well as financial aid income limits. A distribution from a 529 Plan to pay college expenses is not considered a “base-year income” that would reduce next year’s financial aid eligibility. It is important to remember that federal financial aid rules are subject to change, and you should confer with your accountant on the particulars of your situation.
12. Great Option for Grandparents
Grandparents can support a grandchild’s college education while benefiting from specific tax treatment. Any contributions up to $19,000 qualify for annual gift tax exclusion (and up to $95,000 in one year as long as no additional contribution is made over the next five years. The $95,000 maximum can become $190,000 for a married couple filing together, which is referred to as front-loading or superfunding the plan). Any contributions are removed from their estate, thus reducing any potential estate tax liability. Depending on the state, they may also be eligible for state income tax deductions.
In addition, if grandparents are the owners of a 529 account, the funds will not impact financial aid eligibility.
13. Time Limits on Withdrawals
529 Savings Plans do not have specific withdrawal or age requirements. Prepaid Tuition Plans, however, may have time limits for withdrawals.
14. Roll Overs
Every state allows for one rollover to another 529 plan per year without triggering tax penalties. However, you may have to repay state tax deductions or pay a fee if you go from an in-state plan to an out-of- state plan.
15. Prioritize Retirement
It is important that you don’t sacrifice your retirement savings for college savings. There are no scholarships and loans available for retirement and the biggest gift you can give your children is not relying on them for financial support in retirement.
Have questions about college savings plans? Have specific questions about 529 Plans specific to Oregon? Get in touch with us.
Sources: IRS, Kiplinger, Saving for College
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Video: Reminders during Heightened Market Volatility
Matthew Sheets, CFP®, shares important factors to remember during times of heightened market volatility.
