Probate & Trust Law Section Conference Manual ... - Minnesota CLE

eginning with the year of the contribution. Code § 529(c)(2)(B); Prop.
Treas. Reg. § 1.529-5(b)(2). That means the donor can contribute $70,000
in 2013 without incurring gift tax or, presumably, GST tax. Section
529(c)(2) provides:
(2) GIFT TAX TREATMENT OF CONTRIBUTIONS. – For
purposes of chapters 12 and 13 –
(A) IN GENERAL. – Any contribution to a
qualified tuition program on behalf of any designated
beneficiary –
(i) shall be treated as a completed gift to
such beneficiary which is not a future interest in
property, and
(ii) shall not be treated as a qualified
transfer under section 2503(e).
(B) TREATMENT OF EXCESS CONTRIBUTIONS. – If
the aggregate amount of contributions described in
subparagraph (A) during the calendar year by a donor
exceeds the limitation for such year under section 2503(b),
such aggregate amount shall, at the election of the donor,
be taken into account for purposes of such section ratably
over the 5-year period beginning with such calendar year.
The donor can make the election for some beneficiaries but not others.
The instructions to the gift tax return (2012) state, “You can make this
election for as many separate people as you made QTP contributions.”
C. Estate Taxation of Section 529 Savings Accounts
1. Exclusion from Donor’s Estate. Except as provided below with respect
to the five-year averaging election, the value of a section 529 account will
not be included in the gross estate of the account owner for federal estate
tax purposes. Code § 529(c)(4)(A).
2. Five-Year Spread. A donor electing the five-year spread must survive
into the fifth year (but not to the end of the fifth year) to have the entire
amount of contributions excluded from his or her estate. Code
§ 529(c)(4)(C); Prop. Treas. Reg. § 1.529-5(d)(2). Section 529(c)(4)(A)
provides “No amount shall be includible in the gross estate of any
individual for purposes of chapter 11 by reason in an interest of a qualified
tuition program.” Section 529(c)(4)(C), however, provides that “In the
case of a donor who makes the election described in paragraph (2)(B) and
who dies before the close of the 5-year period referred to in such
paragraph, notwithstanding subparagraph (A), the gross estate of the donor
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