& a case for superfunding

The most valuable asset in a college savings plan is not the size of the contribution. It is the number of years that contribution has to work.

This month we are publishing a series to help you and your child prepare for college. We begin with the 529 plan, because it remains the most flexible and tax-efficient tool available to most families, and with a strategy too few families know about: superfunding.

What a 529 Plan Is

A 529 plan is a tax-advantaged education savings account. You contribute after-tax dollars, the account grows without annual taxation, and qualified withdrawals are free of federal income tax. Many states add a deduction or credit for contributions to their own plan.

Two features set it apart. The account owner retains control, so the assets do not transfer to the child at eighteen. And the beneficiary may be changed to another qualifying family member, so unused funds are rarely stranded.

What a 529 Plan Can Fund

The list is longer than most families assume, and it expanded again under the One Big Beautiful Bill Act, signed into law in July 2025.

Superfunding is the practice of contributing five years of gifts in a single year, then electing to spread that gift across five years for gift tax purposes.

See the What it Means to Superfund section below for details.

What It Means to Superfund

Superfunding is the practice of contributing five years of gifts in a single year, then electing to spread that gift across five years for gift tax purposes. The beneficiary receives the full amount immediately. Under the 2026 figures:

• The annual gift tax exclusion is $19,000 per recipient, so one contributor may place $95,000 into a single account in one year. A married couple electing to split gifts may contribute $190,000.
• The election is not automatic. The contributor must file IRS Form 709 for each of the five years and check the box indicating the gift is spread evenly.
• Contributing above that amount is permitted. The excess applies against the lifetime gift and estate tax exemption, which the One Big Beautiful Bill Act set at $15 million per individual and $30 million per married couple beginning in 2026.

Why the Strategy Works

A grandparent with ten grandchildren who superfunds each account at the maximum moves $950,000 out of the taxable estate in a single year, with none of it applied against the lifetime exemption. A child with two parents and two grandparents contributing the maximum receives $380,000 in year one.

The estate planning benefit, however, is secondary. Compounding is what matters. Dollars contributed in year one receive five additional years of tax-free growth relative to the same dollars contributed on an annual schedule, and across an eighteen-year horizon that difference is significant. Superfunding also converts an annual decision into one made every five years.

Considerations Before You Contribute

• Your own retirement. We do not recommend funding education at the expense of your retirement security. Your child can borrow for school. You cannot borrow for retirement.
• Other gifts to the same recipient during the five-year period, which may push you past the annual exclusion.
• Mortality within the window. If the contributor dies before the five years conclude, contributions allocated to the remaining years return to the taxable estate.
• Financial aid treatment, which differs depending on whether the account is parent-owned or grandparent-owned.

Our Recommendation

Superfunding is not appropriate for every family. It requires available assets, a long time horizon, and a clear view of your own financial position. For families who have all three, it is among the most efficient wealth transfers available, and it remains underused.

If you are considering a 529 contribution this fall, have the conversation before year end. Contact your advisor. We will model the outcome, coordinate with your tax professional, and help you determine whether superfunding belongs in your plan. Additional installments in this series will follow throughout September.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Disclosure:

Source: Internal Revenue Service: What’s New in Estate and Gift Tax; About Form 709; Publication 970, Tax Benefits for Education. Public Law 119-21, One Big Beautiful Bill Act, enacted July 4, 2025. SECURE 2.0 Act of 2022, Section 126.

Tracking #: 1166507