Dynasty 529 Plans and Structural Inequality

Abstract

The tax advantages available through 529 accounts, such as the potential for perpetual tax-free growth, have been maximized by the wealth defense industry that operates to the advantage of high income and wealth families in the United States. This essay is more a thought piece than a polemic, with the goal of starting a conversation on an important issue not often discussed: a 2018 change to the 529 structure slipped into the Tax Cuts and Jobs Act (TCJA) has essentially turned 529 plans into a government-subsidized school voucher scheme for the wealthy. Through this change, the dynasty education trust has become an even more attractive umbrella under which multiple 529 accounts may be managed by an affluent family to pay not just for college but also all private school (K-12) on a tax-sheltered basis.

Keywords: tax, structural inequality, 529 plan, 529 plans, education finance, tax cuts and jobs act, dynasty education trust, dynasty trust