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529 PlanningQualified Tuition Programs
10+ Years Later
Estate Planning Council Hampden CountyFebruary 12, 2013
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The BasicsThe Basics
• Prepaid Tuition Plans
• College Savings Plans
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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
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That 5 Year ThingThat 5 Year Thing
• Elected on a gift tax return
• What about late filing?
• Concurrent elections to “top off” ?
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Switching Beneficiary?Switching Beneficiary?
• Family member of beneficiary
• Extensive listing of “family member”
• No limit to frequency
• Make other changes at same time
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Investment ChangesPlan ChangesInvestment ChangesPlan Changes
• Once per year
• Unless beneficiary change
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Plan DistributionsPlan Distributions
• “Qualified Higher Education Expenses”: Tuition, Fees, Books, Supplies and Equipment Required for Enrollment, Room and Board.
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Plan DistributionsPlan Distributions
• Used for education. How soon? Is this a calendar year rule? Is this a reasonable time rule?
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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
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Losing MoneyLosing Money
• Commentary in IRS publication
• Miscellaneous deduction
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Owners OwnOwners Own
• Account available to creditors of owner
• Account treated as asset of parent for financial aid—regardless of owner
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Special OwnersSpecial Owners
• UGMA/UTMA account “owners” and restrictions on beneficiary change.
• Trusts as account owners.
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State DistinctionsState Distinctions
• State Deductions for Contributions
• Maximum Contributions
• Investment Options
• Fees/Penalties
• Time/Age Limitations
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State DistinctionsState Distinctions
• Some states have multiple plans – Nevada has 5 different arrangements
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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)