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I have an Education IRA and a 529 for my kid. The reason I created the Education IRA was to be able to manage the money myself rather than investing with a money manager in a 529. Since the E-IRA has a limit of 2000 per year, I am not sure if mine is a good strategy. So I have been thinking of rolling over all the money from E-IRA to the 529 I have with Fidelity. My questions are -

1. Is it possible?

2. If so, how does the tax consequences plays in the picture? I have stocks in the E-IRA which I do not want to sell for the proceeds (What I would like to do is transfer that stock in my brokerage account and transfer the proceeds from there - as in I want to to in-kind transfer and then roll-over). Can this be done? Or is it wishful thinking?
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I have an Education IRA and a 529 for my kid. The reason I created the Education IRA was to be able to manage the money myself rather than investing with a money manager in a 529. Since the E-IRA has a limit of 2000 per year, I am not sure if mine is a good strategy. So I have been thinking of rolling over all the money from E-IRA to the 529 I have with Fidelity. My questions are -

1. Is it possible?


No. See Pub 970.

I don't understand why you want to get rid of the ESA just because of the contribution limit. You can contribute to both the ESA and the 529, and Pub 970 has comprehensive examples of using both to pay qualified expenses.

Phil
Rule Your Retirement Home Fool
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So I have been thinking of rolling over all the money from E-IRA to the 529 I have with Fidelity. My questions are -

1. Is it possible?


No. See Pub 970.

From the reading I've done online and in reading Pub 970, I thought the answer was 'Yes'.

e.g., from Pub 970:
Rollovers and Other Transfers
Assets can be rolled over or transferred from one QTP to another. In addition, the designated beneficiary can be changed without transferring accounts.

Rollovers
Any amount distributed from a QTP is not taxable if it is rolled over to another QTP for the benefit of the same beneficiary or for the benefit of a member of the beneficiary's family (including the beneficiary's spouse). An amount is rolled over if it is paid to another QTP within 60 days after the date of the distribution.

Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. These are not taxable distributions.

and some content from Fairmark.com:
http://fairmark.com/college/saving/coverdell/moving.htm
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From the reading I've done online and in reading Pub 970, I thought the answer was 'Yes'.

Thanks for the catch.

You are correct where it matters. The key is that a contribution to a 529 with the same beneficiary as the Coverdell is considered a qualified education expense when determining the taxable portion of a Coverdell distribution. It's not a "rollover," but actually that's a plus since you're not limited by the 60 day rule. You just have to make the contribution in the same year as you took the distribution.

Phil
Rule Your Retirement Home Fool
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2. If so, how does the tax consequences plays in the picture? I have stocks in the E-IRA which I do not want to sell for the proceeds (What I would like to do is transfer that stock in my brokerage account and transfer the proceeds from there - as in I want to to in-kind transfer and then roll-over). Can this be done? Or is it wishful thinking?

Make sure that you read all the posts in this thread. My first answer to your first question was wrong. But keep in mind that you're not doing a rollover. You're taking a distribution from the Coverdell and making a contribution to the 529.

Moving on to #2, I'm not sure what it is you're trying to do. If you're trying to move the stock from the Coverdell to the 529, no. All contributions must be cash.

If you're trying to move the stock from the Coverdell to your personal brokerage account, no problem from a tax perspective. You just contribute cash equal to the value of the stock to the 529. In short, if you contribute to the 529 an amount equal to the total distribution from the Coverdell, there is no tax effect.

Phil
Rule Your Retirement Home Fool
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Hi all,

I learnt from my broker that I cannot transfer stocks from this account. It must be liquidated and cashed out for a distribution/rollover.
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