Unlike retirement savings, which potentially have decades to compound and grow, parents are typically limited to at most about 18 years before their first bills come due for their child’s college education. To help compensate for this, the 529 plan supports a unique feature which allows you to pre-fund up to five years of contributions gift tax-free. This capability is commonly known as superfunding.
Superfunding dramatically increases the amount you can start a 529 plan without incurring federal gift taxes. Instead of the $14,000 per year annual gift tax exclusion limit, each parent can pre-fund up to $70,000 (5 x $14,000). Together, that means parents can open a 529 plan with $140,000. Obviously, that’s a tremendous amount to allocate to a savings plan up front, but the benefits are numerous in situations where it’s possible.