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 Investment change restrictions Plan change restrictions NO tax on qualified distributions

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

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

Investment Changes Plan Changes Once per year Unless beneficiary change

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

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

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

Losing Money Commentary in IRS publication Miscellaneous deduction

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

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

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

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

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)

Resources