The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies


Subject:  Re: Gift to 529 plan Date:  10/6/2012  11:23 PM
Author:  JAFO31 Number:  116754 of 127613


<<<You own the 529 plan. A gift to the 529 plan is a gift to you, NOT your son. Owners can always withdraw funds from a plan.

If the gift is to your son, then you would need to open another 529 plan account in which your son was both the owner and the beneficiary.

Putting your son's assets into your 529 plan is converting his assets.>>>

"I looked into this some more."


"Fidelity had two options when I opened the account. Individual or custodial. They point out that individual is "This is the most common type of 529 plan account. It enables an individual to save for qualified higher education expenses for a designated beneficiary." I picked this one based on the description."


"Instead I should have picked custodial."


"I'll open a new account as a custodial account."

This may not be issues for you, but at least two things for you to think anbout.

If you open it as custodial, then the money is your son's money.

1. When he hits the age of majority, he will control withdrawals, including choosing to withdraw for non-educational use, with tax penalty, and buying fast cars or women, or any of a host of other things.

2. If you might at all be expecting need based aid, the federal methodology uses 35% (IIRC) of chlild's assets and 5% (IIRC) of parents assets in calculating EFC (Expected Financial Contribution) toward school. If your parents owned the account, it would not even be reported on the FAFSA, and the account you own will count as a parent asset.

The FAFSA from and instructions and explanations ar available online if you wish to verify.

Regards, JAFO
Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us