Who owns 529 assets

Note that some prepaid tuition plans may need a longer timeline to see a significant return on investment, so be sure to check with plan administrators. What if my beneficiary receives a scholarship? You can use your funds to pay for expenses not covered by the scholarship, such as room and board, books and other required supplies.

Who qualifies as a family member of the beneficiary? A qualifying family member includes:. In addition, the spouse of the beneficiary or the spouse of any of those listed above also qualifies as a family member of the beneficiary.

Are there age or income limitations for participating in a plan? Anyone can participate in a plan regardless of income of the account owner and in most states, regardless of the age of the beneficiary. How do I open a plan? To learn more about a particular plan and open an account, you can contact the state which administers the program directly.

CSPN offers information and links to plan websites and toll-free numbers to contact the state plans. Most states offer residents the opportunity to invest in the plan directly though the state. Advisor Sold programs offer professional investment advice and service with standard sales commissions applying.

How can I change the beneficiary on an account? Each plan make available all forms necessary for changing the beneficiary on an account. Contact your plan to determine the specific requirements and forms necessary to complete this procedure. Depending on the relationship of the new and old beneficiaries, changing the beneficiary of an account may trigger a taxable event, which could also include a penalty, gift tax or both. Is investment in plans recommended by financial advisors?

Many financial planners, tax accountants, and other financial advisors recommend plans to their clients as a program that may fit their college planning needs. You may want to consult an advisor to see if plans would be best for you. Are there restrictions regarding plans and educational savings accounts? Individuals can contribute to both plans and Coverdell Education Savings Accounts. Once an account is established, who controls the investments?

Many states contract with an investment manager to work with the state to develop investment portfolios and options that will help investors meet their college savings needs. Federal law prohibits the investor from having direct control over the selection of specific investments; therefore the state and the investment manager typically offer multiple savings options for the investor to choose from when they open an account. The account owner may change investment options subject to certain federal tax law limitations.

Who can contribute to an account? Generally, anyone can make a contribution to an account for any beneficiary. However, you should contact the plan of your choice to determine any restrictions that may apply.

You may find that you will only be eligible for specific state tax incentives by being recognized as the account owner. The most common investment option is the age-based allocation strategy in which the age of the beneficiary determines the specific mix of investments. As the child ages, the investment mix is automatically reallocated and becomes more conservative as the beneficiary approaches college.

Some states offer guaranteed or principal protected options, as well as FDIC insured bank options. Can you change investment options once you have opened an account?

You may transfer all or any portion of the funds already invested in a particular investment option to another investment option twice per calendar year or upon a change of the beneficiary of your Savings Trust Account to a family member of the beneficiary. Additionally, each time a new contribution is made to an account, the investor can select a different investment option for the new contribution into the plan.

Can the savings in a account be rolled over to another program? Who controls a prepaid tuition account? The account purchaser maintains control over all of the money in the account and is the only one who can request account changes or refunds.

Typically, a prepaid account has only one owner, check with the plan in your state for details. The student beneficiary does not have any control over the account, unless he or she is also the account purchaser. Does the account owner have to be related to the beneficiary? In most states, you can open an account for your child, grandchild, niece or nephew, friend — even yourself. Review the program materials for naming and changing the designated student beneficiary. What are the eligibility requirements to participate in a prepaid tuition plan?

Typically, the beneficiary of a prepaid tuition account must be U. Additionally, either the account owner or the beneficiary must be a resident of the state that administers the plan at the time the application is signed. Most prepaid plans also require that the beneficiary be a participant in the plan for at least three years prior to using the account to pay for higher education.

Grandparents need to keep the federal generation-skipping transfer tax GSTT in mind when contributing to a grandchild's account. The GSTT is a tax on transfers made during your life and at your death to someone who is more than one generation below you, such as a grandchild. The GSTT is imposed in addition to not instead of federal gift and estate tax.

Only the portion that causes a federal gift tax will also result in a GSTT. Note: Contributions to a account may affect your eligibility for Medicaid. Contact an experienced elder law attorney for more information. If the owner of a account dies, the value of the account will not usually be included in his or her estate. Instead, the value of the account will be included in the estate of the designated beneficiary of the account.

There is an exception, though, if you made the five-year election as described previously and died before the five-year period ended. In this case, the portion of the contribution allocated to the years after your death would be included in your federal gross estate. You die in Year 2.

Some states have an estate tax like the federal estate tax; other states calculate estate taxes differently. Review the rules in your state so you know how your account will be taxed at your death.

When the account owner dies, the terms of the plan will control who becomes the new account owner. Some states permit the account owner to name a contingent account owner, who'd assume all rights if the original account owner dies. In other states, account ownership may pass to the designated beneficiary.

Alternatively, the account may be considered part of the account owner's probate estate and may pass according to a will or through the state's intestacy laws if there is no will. If the designated beneficiary of your account dies, look to the rules of your plan for control issues. Distributions do not affect eligibility i. See GEN Custodial Coverdell ESAs owned by a student, where the student is both the account owner and beneficiary, are reported as a parent asset if the child is a dependent student and a student asset if the student is an independent student.

This treatment is effective with the award year due to a legislative change enacted in the College Cost Reduction and Access Act of Section College Savings Plan asset of account owner low impact if owned by student or parents; high impact if owned by a third party Comments: Qualified distributions do not affect eligibility i. Note that non-qualified distributions i. Custodial college savings plans owned by a student, where the student is both the account owner and beneficiary, are reported as a parent asset if the child is a dependent student and a student asset if the student is an independent student.

Section Prepaid Tuition Plan asset of account owner low impact if owned by student or parents; high impact if owned by a third party Comments: Since the Higher Education Reconciliation Act of , prepaid tuition plans have been treated as an asset on the FAFSA, with an asset value equal to the refund value.

Qualified distributions do not affect eligibility i. Custodial prepaid tuition plans owned by a student, where the student is both the account owner and beneficiary, are reported as a parent asset if the child is a dependent student and a student asset if the student is an independent student. A bond registered in the child's name as a single or co-owner counts as a child asset high impact. If the bond was registered in the child's name, but parent's owner's funds were used to purchase the bond, the parent may change the beneficiary.

If you borrow from the k instead of withdrawing funds, amount received does not count as income. Other Trust Funds asset of beneficiary high impact Comments: Generally speaking, voluntary restrictions on uses of the trust will backfire, hurting financial aid eligibility. Only court-ordered involuntary trusts, such as those established to pay future medical expenses, are omitted from the FAFSA. All other trusts will generally count as an asset of the beneficiary.

If the trust assigns ownership of the income to one party and the principal to another, you may need to do a net present value calculation to determine the value of the asset.