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I will be inheriting a portion of my father's trust. My child is in college now, and I contribute the full amount to the trust every year. Are there tax advantages to disperse proceeds from the trust directly to the 529 plan? Second question: Since my name is on the trust, can both of us (me and the trust) contribute $5000 each to the 529 plan?

  • Something to consider is the time frame of the 529. If the child is in college the time frame may be so short that the tax savings may not mean much. The state tax savings may already being maximized if the taxpayer and the 529 are from the same state. – mhoran_psprep Sep 29 '14 at 16:30
  • You are inheriting money from your father's trust. Ok. You "contribute the full amount to the trust every year." What does this mean? Where does $5000 come in to play? Without more details, this question makes no sense. – JTP - Apologise to Monica Sep 29 '14 at 22:46
  • $5k per person/trust? is the most that can be contributed per year. The 529 plan is in one state and the trust in another state. I am a beneficiary of the trust set up for my father's estate. He recently died. – Les Oct 1 '14 at 3:01
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You definitely need an estate lawyer and maybe a CPA. My estate lawyer was generally knowledgable about estate tax.

The gift tax exclusion is $14,000 per year. Your 529 contributions are considered gifts. There is also something called a generation skipping transfer tax, the details of which I'm not familiar with.

The best advice would be dependent on how your father's will and trusts were set-up, and the rules of your state.

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You should probably talk to an estate attorney (a lawyer duly licensed in your State) and a licensed tax adviser (EA/CPA licensed in your State) about this, as this may become tricky. It depends greatly on how the trust is defined and who are the beneficiaries.

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