Even wealthy families need help meeting college costs these days. 529 plans offer a tax-advantaged way to save for hefty college expenses. If you have the money, you can sock away a lot without a federal tax bite – and in some places even get a state tax break.

Children of high-income households rarely qualify for any needs-based financial aid, and surging costs of higher education drive many families to look to get more bang for their college bucks. Investing a large lump sum amount in a 529 savings plan using a special five-year election offers such substantial tax savings that President Barack Obama, according to his 2007 tax return, did just this for his own children.

Current tax law allows a person to give up to $14,000 in cash, securities or property without having to file a gift tax form. Married couples get to double dip on this annual exclusion. If Grandma and Grandpa Jackson have 10 grandchildren, for example, they can each open up a 529 account benefitting each grandchild for a total of 20 accounts. This allows them to maximize their gifts and contribute up to $280,000 ($14,000 times 20 accounts) to 529 plans without filing a gift tax return. If they write checks from a joint account, however, they must file a gift tax return (IRS Form 709) to make sure they elect to split the contribution.

Going over the $14,000 annual exclusion isn’t that bad. Other than filling out some extra tax reports, you don’t start paying any gift taxes until you exceed the lifetime gift tax exemption of $5.25 million, which is doubled for couples. Most prefer to keep their gifting below $14,000 to avoid having to track their unused exemption for the rest of their life.

You can also pay for someone’s qualified college expenses or pay their medical bills of any size without going over the annual gift exclusion. Unsurprisingly, lawmakers include political contributions in this list of gifts that are exempt from any limits.  (Anyone else want to see this law repealed?)

Those treating a large 529 contribution as if it were made over a five-year period are another exception. To continue with our example, the Jackson’s can each contribute $70,000 – representing five years of $14,000 contributions – at once to each beneficiary’s account. This allows a wealthy couple to contribute up to $140,000 per beneficiary. Since the Jackson’s have 10 grandchildren, they can contribute up to $1.4 million to 529s without using a cent from their lifetime gift exemption.

Anytime you consider maximizing 529 contributions, you need to be careful to note that you have fully used up the exclusion for the year. Any other gifts for birthdays or graduations will have tax administration consequences.

Many states offer helpful tax incentives for contributing to a 529 plan. Pennsylvania, one of the most generous states, offers a $14,000 state tax deduction or $28,000 for couples. In Virginia, those under age 70 may deduct $4,000 per beneficiary per donor, meaning if a husband and wife each opened up separate accounts, they could deduct up to $8,000 combined per child and any unused deductions get an unlimited carry forward. Those over age 70 have no limit. The Jacksons, for example, could deduct the full $1,400,000 from their state taxes and carry this forward until it’s used up.

Most gifts that leave your estate also leave your control. Not so the 529 – which is counted outside the estate but which you continue to maintain control. Also, the 529 plan can be a gift that keeps on giving. You may give the next generation 529 funds your children or grandchildren do not use up. Gift tax limits apply to this second transfer, but I expect that a large window of opportunity will remain to create an educational inheritance passed to three generations or more. And as long as these assets are used for qualified expenses including tuition, room & board and required books or other materials for classes, the taxman leaves the money alone.