Personal Finance (Not Investing) • 529 Questions

I am trying to read through all of the post, let me see if I gotten everything correct.

1. 529 can have a owner and a beneficiary. The owner controls the plan while the money goes to the beneficiary. It's possible to have the owner and beneficiary to be the same.
2. The owner may change the beneficiary at any time, but who can be beneficiary is limited to relatives. One of the post has a nice graphical chart of this, but I haven't been able to locate it.
3. When the owner contribute to the 529 plan, the contribution is no longer part of the owner's estate and is technically part of the beneficary's estate. The exception to this if you make use of the 5 year superfund provision, where part of the contribution may remain in the dono'r estate until the 5 years have passed.
4. Contribution is considered a gift, so you cannot say gift your child $10K in 529 and at the same time $10K in a crummey trust (assuming that $20K exceed the annual gift limit).
5. For financial purposes, 529 is considered part of the parent's estate in the calculation.
6. If the beneficiary receives a scholarship, the owner can withdraw the matching amount penalty free. However, earnings will be taxed.
7. Up to $35K can be rollover from a 529 to a Roth IRA for the beneficiary. The 529 must be 15 years old and the beneficary must have earn income to quality. You can only transfer up to the Roth IRA contribution limit.
8. If the owner dies, the Roth IRA can pass to the successor owner (usually the spouse).
9. If the beneficiary dies, the owner may assign a new beneficiary or they can withdraw the amount penalty free but be taxed on the earning or it ca be passed to the beneficiary's estate.

Additional questions

1. When you change beneficiary, the old beneficiary is essentially gifting the money to a new beneficiary. Does this mean the beneficiary is affected by the gift tax?
2. When happens if all of the 529 owners and successor dies? Is the new owner dictated by the state?
3. Regarding the scholarship withdraw? Is the decision to withdraw the money to be the same year the scholarship is granted? Basically let's the beneficiary receives a scholarship for the first year, but you don't know if this will continue. Can you wait until later to withdraw the scholarship amount.
4. In regards to the 529 to Roth, you are basically replacing the beneficiary's contribution for that year. They can't for example convert the limit from 529 and also contribute to a Roth IRA?
5. In regards to withdrawing when there is a scholarship, what would be definition of a "scholarship". I imagine grants by the college do not count? Part of my wife's benefits is that her children can go to her university tuition-free. If my children chose to go to that university, does it count as a scholarship?
6. If the owner allow the the 529 to pass to the beneficiary's estate, what happens to the 529? Is it treated like an IRA? Will there be penalty for withdraw?
7. In the provision that allow the owner to withdraw 529 penalty free in the event of the beneficiary's death. Does this only apply to the original owner or does it apply to the successor owner, too?

I might have more additional questions.

Statistics: Posted by gavinsiu — Wed Sep 11, 2024 8:50 am — Replies 8 — Views 386

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