I want to start a 529 plan for my baby cousin. If she chooses not to go to collage or cannot attend for some reason. What happens to the money or can I take it out or switch it to another cousins name and SSN?
2007-01-11 05:40:36 · 4 answers · asked by DRNoraSarasin 3 in Business & Finance ➔ Personal Finance
529 accounts have many great benefits. I disagree with the other people advising against this plan.
You have a huge number of options with 529s and the costs of the account are very low. If you cousin does not go to college, you can either give the account to someone else or you can cash it out and you will need to pay taxes and a 10% penalty on the earnings (but nothing on the money you invested).
CollegeAmerica is a phenomenal 529 plan. Send me an email if you haven't heard about it. It is available in all 50 states and it has excellent flexibility.
2007-01-11 07:48:08 · answer #1 · answered by MR MONEY 3 · 1⤊ 0⤋
A 529 plan must have a beneficiary & owner named. In your case, you are the owner & cousin is the bene. Just like in life insurance, you as the owner can change the bene when you want. So if for whatever reason, they dont go to college, you can transfer the bene to anyone else that can. That is the great thing about a 529, you can transfer it to anyone at anytime. You dont even have to be related.
And you have large amount of investment options depending on where you open them. And as long as you use the funds for education, there is no tax at all & if you dont, it is tax defered. If you put it in a regular savings or brokerage, you pay short/long term gains. Those taxes could really add up if you have a nice amount in there & it is for someone else.
2007-01-11 06:28:50 · answer #2 · answered by ricks 5 · 1⤊ 0⤋
You can switch beneficiaries so long as the new beneficiary is related to the old beneficiary.
If you are concerned about the possibility of her not using the money, then I wouldn't fuss with the 529 and all the restrictions. I'd just open up a regular investment account and that way the money is always yours (you can change your mind if the situation changes).
Capital gains tax rates aren't all that high (max 15% of profit), so it might not be worth all the fuss just to save a little bit of tax (especially since those 529s are quite limited with their investment options).
2007-01-11 06:30:41 · answer #3 · answered by derek 4 · 0⤊ 2⤋
you might want to check with your state 529 plan, but i do know that in my state, you can add other children as "beneficiaries" at any time to an existing 529. i don't think you can delete beneficiaries, but if there is more than one, and only one takes out the money, then that's all there is to it. I don't think that the original child has rights to take money out if for any purpose other than education. Also, in my state if you take the $ out for anything other than the education of the named beneficiary(ies) you are going to be taxed on that money (income tax). again, best to check with your state's 529 plan administrator, just to be on the safe side - search "529 plans" on the internet & choose the site of one in your state.
2007-01-11 05:53:03 · answer #4 · answered by SmartAleck 5 · 1⤊ 0⤋