Without going into the tragic details that have led me to these questions: we have a 529 plan with ~$64k for which the beneficiary is now deceased.
The immediate siblings also each have a 529 and we do not intend to assign one of them as the new beneficiary. We have "qualified individuals" we wouldn't mind helping with this account (1st cousins of the original beneficiary).
Some potential issues:
- A 529 can only have one beneficiary
- Assigning a new beneficiary of an account worth more than the annual gift tax exclusion would decrease our lifetime gift tax exclusion (am I understanding this correctly?). This isn't a problem right now for us, but if we continue to work and save for 20 years, and the lifetime exclusion is reduced in the future through expiration of current amounts, or other law changes, we can imagine it might be a problem in the future and want to be conscious of it.
Some questions:
- Can I split the 529 into four accounts with $16k each and name a different 1st cousin as the beneficiary for each account? This would mean each account would be less than the annual gift tax exclusion.
- When the beneficiary has died, to avoid a 10% penalty, does a distribution have to go to the beneficiary or their estate, or can it just go to the account owner?
- Should we just not touch this account for 30 years, and treat it like an IRA? I know earnings would be taxed upon withdrawal - should we also expect to pay the 10% penalty?
- Some of the first degree cousins in college could be receiving various forms of financial aid (I don't know for sure). I don't really want to make them a 529 beneficiary that would disqualify them for any of the financial aid they are receiving, but if you have any ideas about this - please comment.
Any other recommendations or ideas would be helpful, thanks.
PS - Although I am complete BH/DIY to the core with finance stuff, I did speak with a financial advisor (with whom I had no prior relationship) about some of these questions and they didn't know this level of detail. I called and spoke to a phone representative for my529 - Utah (since I understand some of this stuff could be plan/state specific) and they were similarly not helpful. I think these questions are not the ones they commonly encounter.
The immediate siblings also each have a 529 and we do not intend to assign one of them as the new beneficiary. We have "qualified individuals" we wouldn't mind helping with this account (1st cousins of the original beneficiary).
Some potential issues:
- A 529 can only have one beneficiary
- Assigning a new beneficiary of an account worth more than the annual gift tax exclusion would decrease our lifetime gift tax exclusion (am I understanding this correctly?). This isn't a problem right now for us, but if we continue to work and save for 20 years, and the lifetime exclusion is reduced in the future through expiration of current amounts, or other law changes, we can imagine it might be a problem in the future and want to be conscious of it.
Some questions:
- Can I split the 529 into four accounts with $16k each and name a different 1st cousin as the beneficiary for each account? This would mean each account would be less than the annual gift tax exclusion.
- When the beneficiary has died, to avoid a 10% penalty, does a distribution have to go to the beneficiary or their estate, or can it just go to the account owner?
- Should we just not touch this account for 30 years, and treat it like an IRA? I know earnings would be taxed upon withdrawal - should we also expect to pay the 10% penalty?
- Some of the first degree cousins in college could be receiving various forms of financial aid (I don't know for sure). I don't really want to make them a 529 beneficiary that would disqualify them for any of the financial aid they are receiving, but if you have any ideas about this - please comment.
Any other recommendations or ideas would be helpful, thanks.
PS - Although I am complete BH/DIY to the core with finance stuff, I did speak with a financial advisor (with whom I had no prior relationship) about some of these questions and they didn't know this level of detail. I called and spoke to a phone representative for my529 - Utah (since I understand some of this stuff could be plan/state specific) and they were similarly not helpful. I think these questions are not the ones they commonly encounter.
Statistics: Posted by PoeticalDeportment — Thu Aug 29, 2024 3:23 pm — Replies 0 — Views 20