For estate tax planning, 529 college savings plans can be valuable. If your parents would like to get some estate tax relief and also help your children, suggest making gifts via 529 plans.
Take the case of Jim and Marge, who set up 529 accounts for each of their four grandchildren. The amounts they contribute to these accounts are out of their taxable estates.
However, Jim and Marge are the owners of these accounts–the grandchildren are the beneficiaries. If Jim and Marge should need money, they can take money out of the 529 plans. They’ll owe income tax and a 10 percent penalty on any earnings inside the plan, but at least they have access to the money.