529 PlanningQualified Tuition Programs

10+ Years Later

Estate Planning Council Hampden CountyFebruary 12, 2013

The BasicsThe Basics

• Prepaid Tuition Plans

• College Savings Plans

The BasicsThe 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 ThingThat 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 ChangesPlan ChangesInvestment ChangesPlan Changes

• Once per year

• Unless beneficiary change

Plan DistributionsPlan Distributions

• “Qualified Higher Education Expenses”: Tuition, Fees, Books, Supplies and Equipment Required for Enrollment, Room and Board.

Plan DistributionsPlan Distributions

• Used for education. How soon? Is this a calendar year rule? Is this a reasonable time rule?

IRS Matching Program ProblemsIRS 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 MoneyLosing Money

• Commentary in IRS publication

• Miscellaneous deduction

Owners OwnOwners Own

• Account available to creditors of owner

• Account treated as asset of parent for financial aid—regardless of owner

Special OwnersSpecial Owners

• UGMA/UTMA account “owners” and restrictions on beneficiary change.

• Trusts as account owners.

State DistinctionsState Distinctions

• State Deductions for Contributions

• Maximum Contributions

• Investment Options

• Fees/Penalties

• Time/Age Limitations

State DistinctionsState Distinctions

• Some states have multiple plans – Nevada has 5 different arrangements

Rated Best by MorningstarRated 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)

ResourcesResources