Wooden bookshelves filled with books

In the United States, even if you’re wealthy, you may fret about how best to fund your children’s education. That’s unsurprising, given that costs can run as high as $85,000 a year per child at some of the nation’s most expensive high schools and colleges.

Fortunately, there are several ways U.S. taxpayers might organize their finances to most economically foot these hefty bills.1

The simplest and, as it happens, most tax-efficient way to provide for your children’s education is to pay as you go. Unfortunately, this approach is also the riskiest: No one can say what obstacles might arise before you’re finished paying for schooling.

However, there are three ways to set aside money to help you better ensure funds will be available to support your children’s education: a 529 account, an irrevocable trust for the benefit of the child2 and a Uniform Transfers to Minors Act (UTMA) account. All three are a form of forced savings – a parent, grandparent or another relative creates an account for a child’s benefit and contributes to it, whether all at once or over the years. That fund, and its earnings, can grow over time and become a pool of wealth that the family draws on to pay the educational expenses.

Which option is right for you and your family? This article can help you decide.

What others are doing

We find that J.P. Morgan clients favor trusts and 529 accounts over UTMA accounts. Many dislike the potential for UTMA assets to wind up in the hands of a young adult. With UTMA accounts, the child generally gains complete control of all the assets at age 21.

As for 529 accounts and irrevocable trusts, we find that clients with the largest fortunes tend to choose trusts to fund their children’s education, while those with slightly less tend to rely on 529s. Some (at all wealth levels) use both. Here’s why:

Irrevocable trusts

An irrevocable trust is costly but also the most flexible. To set up and manage a trust properly, you should have an estate planning lawyer draft the trust document, then hire a trustee to administer and invest the trust assets.

The reasons people go through the effort and expense of irrevocable trusts are clear:

  • Trusts may grow and last: Trusts can grow to whatever size their investment performance allows. By contrast, legal constraints limit how much can be contributed to a 529 account, thus limiting an account’s growth potential. An irrevocable trust also can continue to benefit the child for years, even for the child’s entire life (as long as the trust agreement so provides). Trust assets will be excluded from the donor’s estate
  • Trust assets might be used for many purposes: Trust assets can be used for any purpose, even those having nothing to do with education (as long as the trust agreement so provides)
  • Trusts can help you transfer wealth to the next generation: The income generated by an irrevocable trust is subject to income tax, but your trust agreement could stipulate that you (as the grantor) will pay those taxes as long as you live. That way, the trust assets grow free of income taxes, and you transfer more money out of your estate free of estate taxes

529 accounts

Given all the advantages of a trust, why would a parent with great wealth opt for a 529 when the funds in those accounts can only be used for education?

The answer is that 529 accounts can be easily established and managed, and – most importantly – they offer superior tax advantages:

  • They’re tax-free: So long as its funds are used for educational expenses, no taxes are paid on either 529 account funds’ earnings or distributions for the child’s benefit, and the assets are excluded from the grantor’s estate (as long as the grantor outlives any “superfunded” period)
  • Contributions are potentially deductible: Many states allow donors to deduct, against their state income taxes, contributions made to 529 accounts administered by the state of which there are a resident
  • They offer “superfundability”: Donors can, if they like, contribute five years’ worth of their annual exclusion gifts to as many 529 accounts for different children as they like without using any of their lifetime gift tax exclusion (which in 2023 is $12.92 million)

    In 2023, that would be five times the $17,000 annual gift exclusion, for a total of $85,000 (or $170,000 for a married couple) to each 529 account. Say, for example, you have three children: You could contribute a total of $255,000 (or $510,000, if married) to your children’s education free of gift taxes this year.

The 529’s super funding ability – unique in U.S. tax law – is evidence of Congress’s desire to make it easier for parents to save for their children’s education, and a recent legislative development underscores Congress’s bias in favor of 529 accounts. The so-called SECURE Act 2.03 has a measure designed to fix a problem that has been growing since the law creating 529s was enacted in 1997. Many families overfunded 529 accounts and were left with tax problems after the beneficiaries (and other family members) had completed their educations.

Before the SECURE Act 2.0, there would be either income or gift tax consequences, perhaps to the parents or perhaps to the children, once any funds not used for the children’s education left the account. But now, thanks to the SECURE Act 2.0, the beneficiary of an overfunded 529 account can, without tax consequences, put up to $35,000 during their lifetime of the extra funds into a Roth IRA.4

We can help

What’s best for you and your family depends on many factors, including your balance sheet, the nature of your income stream and portfolio, other family members’ potential contributions – and your children’s aspirations.

Whether your child is newborn or about to enter college, or even graduate school, your J.P. Morgan advisor can help you and your tax advisors select the education funding solution that suits you.



Jami Farkas, “Here are the 15 most expensive high schools in America,” gobankingrates.com, August 17, 2022. Robert Farrington, “20 most expensive colleges in 2023,” The College Investor, February 27, 2023.


The trust must be “irrevocable”—meaning that the grantor has given the funds away and cannot reclaim them—to maximize the estate and gift tax benefits of the trust, as well as to prevent the grantor from being tempted to reclaim the funds.


The law is formally entitled H.R.2954—Securing a Strong Retirement Act of 2021.


The annual contribution cap for Roth IRAs is $6,500–$7,500 if the taxpayer is at least 50.


This material is for informational purposes only, and may inform you of certain products and services offered by J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. If you are a person with a disability and need additional support accessing this material, please contact your J.P. Morgan team or email us at accessibility.support@jpmorgan.com for assistance. Please read all Important Information.

Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan representative.

NON-RELIANCECertain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.

Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.

Legal Entity and Regulatory Information.

J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

Bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC.

This document may provide information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC (“JPMS”). The agreements entered into with JPMS, and corresponding disclosures provided with respect to the different products and services provided by JPMS (including our Form ADV disclosure brochure, if and when applicable), contain important information about the capacity in which we will be acting. You should read them all carefully. We encourage clients to speak to their JPMS representative regarding the nature of the products and services and to ask any questions they may have about the difference between brokerage and investment advisory services, including the obligation to disclose conflicts of interests and to act in the best interests of our clients.

J.P. Morgan may hold a position for itself or our other clients which may not be consistent with the information, opinions, estimates, investment strategies or views expressed in this document.  JPMorgan Chase & Co. or its affiliates may hold a position or act as market maker in the financial instruments of any issuer discussed herein or act as an underwriter, placement agent, advisor or lender to such issuer.