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529 Planning Qualified Tuition Programs 10+ Years Later

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

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  1. 529 PlanningQualified Tuition Programs10+ Years Later Estate Planning Council Hampden County February 12, 2013

  2. The Basics • Prepaid Tuition Plans • College Savings Plans

  3. 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

  4. That 5 Year Thing • Elected on a gift tax return • What about late filing? • Concurrent elections to “top off” ?

  5. Switching Beneficiary? • Family member of beneficiary • Extensive listing of “family member” • No limit to frequency • Make other changes at same time

  6. Investment ChangesPlan Changes • Once per year • Unless beneficiary change

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

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

  9. 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

  10. Losing Money • Commentary in IRS publication • Miscellaneous deduction

  11. Owners Own • Account available to creditors of owner • Account treated as asset of parent for financial aid—regardless of owner

  12. Special Owners • UGMA/UTMA account “owners” and restrictions on beneficiary change. • Trusts as account owners.

  13. State Distinctions • State Deductions for Contributions • Maximum Contributions • Investment Options • Fees/Penalties • Time/Age Limitations

  14. State Distinctions • Some states have multiple plans – Nevada has 5 different arrangements

  15. 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)

  16. Resources

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