|
You can contribute to a 529 college savings program regardless of your income level and as owner, you remain in control of the account. You can withdraw your savings for non-college use, but you’ll be subject to income and penalty taxes.
In general, 529 plans don’t have any eligibility income limitations. Any adult – parents, grandparents, other relatives, and friends – can open an account for a designated beneficiary.
The beneficiary qualifications depend on the type of 529 program. Most college savings plans allow anyone of any age to be the beneficiary of an account. Most prepaid tuition plans impose limits on the age of the beneficiary.
You can open multiple 529 accounts for the same student, and more than one person can contribute to a 529 program for the same student. However, states limit the total amount you can contribute for a single beneficiary, with the amount varying from state to state.
In favorable contrast to custodial accounts, as the owner of a 529 program you remain in control of the account. In almost all states the child has no right to the funds in 529 plans. The account owner decides who the designated beneficiary will be, when to make withdrawals, and for what purpose.
If the beneficiary of your account doesn’t attend college, you may defer the account for later use or transfer it to another member of your family. Family is defined broadly, including brothers, sisters, sons, daughters, nephews, nieces, first cousins, certain in-laws, and spouses of these family members.
You can withdraw your savings for non-qualified higher education expenses subject to each plan’s rules, but you’ll owe federal income taxes on the earnings, generally at your income tax rate.
You’ll also incur a 10% federal penalty tax on earnings, unless an exception applies. The exceptions include a student’s disability, death, or receipt of a scholarship.
Article is for educational purposes only and is not intended to provide specific tax or legal advice. For answers to tax questions, please see your tax professional. For legal questions, consult an attorney.
Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free (800) 369-2862. Nondeposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America. The Representative may also be a credit union employee that accepts deposits on behalf of the financial institution.
|
|
|
©1997-2009 CUNA Mutual Group.
|
|
