When an individual passes away, the assets they leave behind are referred to as their estate, and this pool of funds, investments, and property is subject to the federal estate tax if its total value exceeds a certain threshold. Depending on the size of the estate, the tax rate could be as high as 40% or as low as 18%.

For many, 529 plans offer an excellent way to shield a portion of a person’s assets from the estate tax. Any funds contributed to a 529 plan are no longer considered part of a person’s estate, but as the account owner, that person would still retain control over the funds. It should be noted, however, that the IRS may still consider 529 plan contributions when levying the estate tax if those contributions were made in the last five years or so.