Articles Posted in 529 Plans

10.31.18Saving for college but needing to receive Medicaid is a complicated equation.

The answer “It depends” is not much of a comfort when considering how college savings accounts will be treated for Medicaid purposes.  However, it is, unfortunately, the most accurate answer. There are several factors that must be considered:

  • What type of account you used to set aside the college money;

9.7.18Tuition refunds, K-12 education costs and rollovers to ABLE accounts for disability-related expenses, will now reflect recent tax law changes.

New regulations that reflect changes from the 2015 Protecting Americans From Tax Hikes (PATH) Act, and the 2017 tax overhaul will be issued by The Internal Revenue Service (IRS) and Treasury Department, as reported by Think Advisor in the article, “IRS, Treasury to Issue 529 Plan Regs.”

Notice 2018-58 talks about changes to tax laws that will impact 529 plans related to tuition refunds, K-12 education and rollovers to ABLE accounts for disability-related expenses.

8.17.18529 plans are a great way to help parents with taxes and college costs. Grandparents, aunts and uncles and anyone who wants to pitch in, can also benefit.

Starting to put aside money in a 529 college plan when children are very young, is a wonderful way to push yourself to save over an extended period of time, with some added benefits. Your kids get the advantage of having more funds to draw on for college, and you get an investment that grows tax free. It’s a good deal for everyone.

The Green Bay Press Gazette’s recent article, “Benefits of 529 college savings plans keep giving,” reports that the state of Wisconsin’s 529 plan is called the Edvest College Savings Plan.

MP900341499Given the rising cost of most college tuitions, the complexity of college loan agreements and the difficulty for most middle-income families in simply maintaining their budget for ordinary daily household expenses, planning for your children’s college education is an important topic to consider at the earliest possible stages of a child's development. Fortunately, an established method of helping to accomplish this goal is the 529 college savings plan.

The 529 college savings plan is a way to save and set aside money specifically for the purpose of funding higher education. It’s a tax advantaged investment program that’s designed to help you fund future qualified education expenses. The benefits are that it offers flexibility, control, and tax advantages—plus it’s available to anyone who wants to make contributions for qualifying higher-education expenses without income limits (like Grandma or a favorite uncle!). The Legal Intelligencers recent article titled “529 College Savings Plans: How They Work explains more, so let’s break it down.

The 529 owner keeps control of the assets and is allowed to choose how much and when money can be withdrawn. The owner can also change the beneficiary to a different family member related to the original beneficiary (see your estate planning attorney for the rules on this) whenever they like, and the investment allocation can be adjusted once a year.

Diploma“We see that as a big driver for everyone – the opportunity to put your money into the market and get that appreciation and have all those earnings tax-free when you use them for qualified expenses at a university or trade school, or wherever your child or grandchild, or whoever it is you're saving for, decides to go,” Creonte says.

If you are saving up for your child's (or grandchild's) college education, you'll want to consider a 529 College Savings Plan.

What is a 529 Savings Plan? A 529 plan lets an individual contribute after-tax dollars that are designated for qualified higher-education expenses. These expenses include tuition and fees, books, room and board, computers, and supplies. The distributions of these funds for qualified higher-education expenses are not subject to federal income tax. However, states may treat these disbursements differently. As a result, 529 plan investors need to understand the tax strategies that are available to them.

Grandfather and grandaughterEven though many gifts no longer make tax sense, 529 plans remain viable options for both estate tax exclusion and income tax reduction, without much complexity and cost.

Which gifts make sense for taxes these days? Consider your options.

Before recent changes to the federal estate tax exemption amount (i.e., $5 million per taxpayer, as indexed for inflation), taxpayers were encouraged to make lifetime gifts to reduce their federal estate tax. This was especially the case when the exemption was $1 million per taxpayer with top 55% rate on any amount over that. Now, however, the common advice is for all but the über wealthy to retain their assets to ensure there is enough to live on during their lifetime. According to a recent National Law Review article, titled "529 Plans: Estate Tax and Income Tax Advantages," a second benefit of passing assets at death is that the recipient of the assets obtains a "step up" in the assets' basis to fair market value—avoiding income tax on the sale.

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