529 Questions - Bogleheads.org

1. 529 can have a proprietor and a beneficiary. The proprietor controls the plan whereas the cash goes to the beneficiary. It is doable to have the proprietor and beneficiary to be the identical.
2. The proprietor might change the beneficiary at any time, however who could be beneficiary is restricted to family. One of many publish has a pleasant graphical chart of this, however I have never been capable of find it.
3. When the proprietor contribute to the 529 plan, the contribution is not a part of the proprietor’s property and is technically a part of the beneficary’s property. The exception to this should you make use of the 5 yr superfund provision, the place a part of the contribution might stay within the dono’r property till the 5 years have handed.
4. Contribution is taken into account a present, so you can not say present your youngster $10K in 529 and on the identical time $10K in a crummey belief (assuming that $20K exceed the annual present restrict).
5. For monetary functions, 529 is taken into account a part of the dad or mum’s property within the calculation.
6. If the beneficiary receives a scholarship, the proprietor can withdraw the matching quantity penalty free. Nevertheless, earnings will likely be taxed.
7. As much as $35K could be rollover from a 529 to a Roth IRA for the beneficiary. The 529 have to be 15 years outdated and the beneficary will need to have earn revenue to high quality. You possibly can solely switch as much as the Roth IRA contribution restrict.
8. If the proprietor dies, the Roth IRA can move to the successor proprietor (often the partner).
9. If the beneficiary dies, the proprietor might assign a brand new beneficiary or they’ll withdraw the quantity penalty free however be taxed on the incomes or it ca be handed to the beneficiary’s property.

Extra questions

1. While you change beneficiary, the outdated beneficiary is basically gifting the cash to a brand new beneficiary. Does this imply the beneficiary is affected by the present tax?
2. When occurs if all the 529 house owners and successor dies? Is the brand new proprietor dictated by the state?
3. Concerning the scholarship withdraw? Is the choice to withdraw the cash to be the identical yr the scholarship is granted? Mainly let’s the beneficiary receives a scholarship for the primary yr, however you do not know if this can proceed. Are you able to wait till later to withdraw the scholarship quantity.
4. Regarding the 529 to Roth, you’re mainly changing the beneficiary’s contribution for that yr. They can not for instance convert the restrict from 529 and in addition contribute to a Roth IRA?
5. With regard to withdrawing when there’s a scholarship, what could be definition of a “scholarship”. I think about grants by the faculty don’t depend? A part of my spouse’s advantages is that her youngsters can go to her college tuition-free. If my youngsters selected to go to that college, does it depend as a scholarship?
6. If the proprietor permit the the 529 to move to the beneficiary’s property, what occurs to the 529? Is it handled like an IRA? Will there be penalty for withdraw?
7. Within the provision that permit the proprietor to withdraw 529 penalty free within the occasion of the beneficiary’s dying. Does this solely apply to the unique proprietor or does it apply to the successor proprietor, too?

I might need extra extra questions.