89 worked examples.

Vinni is poor but has worked hard through high school to save $10,000 for his college. He finds out that the student SAI is 20%, meaning the $10,000 threatens to reduce his financial aid eligibility by $2,000! Vinni asks his grandparents (or trusted neighbors) to start a 529 account in his name and transfers the $10,000 to that 529 account. Their SAI is 0% on the Student Aid Index (SAI) calculation, meaning the same $10,000 reduces financial aid eligibility by $0. Over 4 years of school at $20,000 tuition, books, rent, and food per year, this could mean an approximate $16,000 difference in student aid eligibility for Vinni.

Bob decided to go back to night school MBA at age 40. As the accounts’ owner, he chooses to use the 529 plans he has formed for his two daughters–ages 6 and 4–thinking they won’t need them for a while. Bob changes the beneficiary of each account to himself, uses some of the funds for his school, then after 2 years changes the beneficiaries back to the girls as he finishes. (Bob then uses the raise he gets for his new degree to contribute more money back to the girls–a happy ending!)

Isaac contributes to his granddaughter’s fund because his son (her father) is an irresponsible drunk most of the time. Isaac is concerned the son could abuse her 529 funds, so he designates his trust as the successor owner in this case. The responsible trustee will care for the granddaughter’s education expense needs.

Dave wants the best for his 15 employees and their children. As CEO, he starts accounts for up to $1,000 per employee per year to split between themselves (to fund either qualified student debt repayment or their continuing education) and their children’s accounts.

Robert’s father passes away, leaving him with $500,000 at age 69. Robert is doing fine in retirement and does not need this extra benefit. He wonders how he can pass the money tax free to his 6 children, their spouses, and 10 grandchildren. Robert gifts $19,000 to each 529 of these 22 people, and keeps the remainder for himself. He receives a tax deduction on a portion of the contributions, up to the state’s maximum amount.