529 plans started at the state level in the 1990s: A History.
Federal laws now give guidance, but each state has its OWN plan with its OWN rules.
Account Basics p12
You are in control.
You are and will stay the owner of the 529 funds. Funds may be disbursed back to you at any time.
You decide the beneficiary.
Each account should have a Successor, in the case of the Owner’s death.
You can decide to change your ownership to someone else without a fee at any time.
You can decide to change the Beneficiary to someone else–including yourself–without a fee at any time.
You can decide to change the Successor to someone else without a fee at any time.
Account owners can have unlimited family and friend beneficiary accounts.
Beneficiaries may have unlimited accounts in their name from different parents, grandparents, kind friends, etc.
Deposits are made via direct payroll deposit, check, ACH, or wire. You can link your bank account for monthly or one time contributions.
Employers, trusts, and other entities may contribute.
Tax returns can be directly gifted to the 529 plan.
Special occasion gifts can be made by others for graduation, birthday, or other special days.
Transfers may be made between accounts of family members.
ABLE accounts for disabled people may be rolled over up to $19,000 per year from a 529 plan.
Understanding Tax Differences p27
In which state plan should I get an account? Decision tree
Is a Tax Deduction or Credit better for contributions?
Understanding qualified tax-free growth–a major benefit of 529 accounts.
There is a high maximum amount allowed in 529 accounts.
Contribution deadlines correspond to the current calendar/tax year.
Account Rollovers are allowed.
Transfers may be made between accounts of family members.
Receiving Distributions
For any non-qualified disbursement, any taxes or fees are ONLY on the earnings portion.
Tax penalties on earnings are waived for some situations.
Fund Selection and Allocation Logistics p36
Fund Selection Decision tree
You can change fund allocations up to 2 times per year without a fee at any time.
Your 529 account can lose money. Most fund selections are not FDIC insured.
Time
Using the 529 for K – 12 p40
Not all states allow K-12 qualified distributions
You may pay for school tuition, books, and software through a 529 account.
You may pay for a tutor through a 529 account.
What is a “tutor”? Decision tree
Beneficiaries with disabilities can pay for treatments.
High school age benefits include test fees and advanced course tuition.
Post- Secondary School p48
Getting a Plan
How much should help? Gifting vs. Loaning: Decision tree
What schools are “qualified”?
529 accounts have limited effects on the need-based student aid (SAI) calculation.
You may pay for tuition, books, or fees with a 529 account.
Registered apprenticeship expenses qualify.
Postsecondary Credentialing, Certificates, or Licensing expenses qualify.
What if your beneficiary receives a scholarship?
You may pay for room and board if the student is enrolled one-half time.
You may pay for computer hardware, software and internet access fees while enrolled.
What may you NOT spend your 529 funds on?
Account owners are responsible for keeping any documents that support a qualified or nonqualified withdrawal.
After Graduation p60
You should consider leaving the account open after post secondary education is finished, as there remain many benefits. Decision tree
You may want your OWN account after college to pay for up to $10,000 qualified education loan principal or interest.
You can repay a sibling’s student loans up to $10,000 as well.
You may transfer any extra funds to a family member (younger sibling?, grandchild?) who needs them.
You could consider establishing a “ladder of giving” approach for your children and then grandchildren.
You may roll over any extra funds to a Roth for the beneficiary up to $35,000. Decision tree
You may pay for continuing education through a 529 account, the rest of your entire career.
You may pay for extra credentialing, registered apprenticeship expenses, or certificates through a 529 account.
You may pay for your licensing through a 529 account, throughout your career.
You may want to close the account and pull excess funds out.
Estate Planning p72
Contributions to your 529 plans are considered “completed gifts” to the beneficiary.
529 plans allow up to $190,000 to be contributed without gift tax at one time.
A 529 account can help avoid the Generation-Skipping transfer (GST) tax.
There is no Generation-Skipping Transfer (GST) tax on 529 distributions.
There are no RMD’s or NIIT on 529 distributions.
There is bankruptcy protection through a 529 account.
Multigenerational wealth transfer through superfunding the 529 account.
Maximizing 529 Advantages p80
Maximizing Funding
Maximizing K-12 options
Maximizing Post Secondary education
Maximizing After Graduation
Maximizing Estate Planning
Other Account Comparisons p86
A 529 investment account is better than a prepaid tuition plan.
A 529 account is better than a Coverdell ESA.
A 529 account is better than a UGMA or UTMA account.
A 529 account is better than a 530A “Trump account” child IRA.