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529 Planning Qualified Tuition Programs 10+ Years Later. Estate Planning Council Hampden County February 12, 2013. The Basics. Prepaid Tuition Plans College Savings Plans. The Basics. It’s a Gift (to beneficiary) It’s not in Estate (of owner) Owners own. Beneficiaries are fungible

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529 planning qualified tuition programs 10 years later

529 PlanningQualified Tuition Programs10+ Years Later

Estate Planning Council Hampden County

February 12, 2013

the basics
The Basics
  • Prepaid Tuition Plans
  • College Savings Plans
the basics1
The Basics
  • It’s a Gift (to beneficiary)
  • It’s not in Estate (of owner)
  • Owners own. Beneficiaries are fungible
  • Investment change restrictions
  • Plan change restrictions
  • NO tax on qualified distributions
that 5 year thing
That 5 Year Thing
  • Elected on a gift tax return
  • What about late filing?
  • Concurrent elections to “top off” ?
switching beneficiary
Switching Beneficiary?
  • Family member of beneficiary
  • Extensive listing of “family member”
  • No limit to frequency
  • Make other changes at same time
investment changes plan changes
Investment ChangesPlan Changes
  • Once per year
  • Unless beneficiary change
plan distributions
Plan Distributions
  • “Qualified Higher Education Expenses”: Tuition, Fees, Books, Supplies and Equipment Required for Enrollment, Room and Board.
plan distributions1
Plan Distributions
  • Used for education. How soon? Is this a calendar year rule? Is this a reasonable time rule?
irs matching program problems
IRS Matching Program Problems
  • Form 1099Q –Distributions
  • Form 1098T – Tuition Payments
  • No place on return to show distributions used to pay expenses.
  • Tuition deduction/credits limited by income
  • Inconsistent preparation of 1098T by education institutions
losing money
Losing Money
  • Commentary in IRS publication
  • Miscellaneous deduction
owners own
Owners Own
  • Account available to creditors of owner
  • Account treated as asset of parent for financial aid—regardless of owner
special owners
Special Owners
  • UGMA/UTMA account “owners” and restrictions on beneficiary change.
  • Trusts as account owners.
state distinctions
State Distinctions
  • State Deductions for Contributions
  • Maximum Contributions
  • Investment Options
  • Fees/Penalties
  • Time/Age Limitations
state distinctions1
State Distinctions
  • Some states have multiple plans – Nevada has 5 different arrangements
rated best by morningstar
Rated Best by Morningstar
  • University of Alaska (T Rowe Price)
  • Maryland College Investment Plan (T Rowe Price)
  • Nevada’s Vanguard 529 Plan (Vanguard Plan)
  • Utah Education Savings Plan (Vanguard Plan)
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