529 Education Plan

[Tykimeister]

Hello,

I have three siblings who all have children. If I want to put money into a 529 education plan, can I make payments to three different plans if my siblings each open a 529 for education expenses? If this is possible, can I reap the tax benefits for it. Or will I have to gift the money to my siblings then they make the contribution themselves?

If there are any other hints to accomplish this goal, I would be glad to hear them.

Thank you!

 

[HenryD]

529 tax benefits, if any, during accumulation flow to the account owner. We used the state plan of DD's maternal GPs. We gifted them the money, they deposited. At tax time they would figure out the benefit to them and deposit that.

One downside of having a non-parent owner was being less tax-favorable during withdrawal. We transferred ownership from grandfather to mother before the withdrawals started. We managed to keep the 529 out of parental assets for the first FAFSA which was part of the goal.

 

[sengsational]

You can, and probably should, open the accounts and designate the various kids as beneficiaries. This way, you are in control of how the funds are invested, and how they are paid out. Your actions don't stop the parents or other family members from opening 529 accounts with those same kids as beneficiaries. Money in the 529's remains "yours", until you cut a check to the kid or the kid's school (i.e. spend it).

The tax advantage is that you'll be able to spend gains on qualified higher education expenses without paying taxes on those gains. So, say you put in $5K and it grows to $10K and goes out as QHEE, you've been able to gift the whole $10K instead of $10K minus taxes on the gains. The "gotcha" is if you don't spend on QHEE, there's a 10% penalty AND tax on the gains! You're free to swizzle the beneficiaries any way you want, as long as you don't go outside of the family. So if Joey decides to be a plumber, his stash can be switch to Sally, who's going to blow tons on medical school.