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Author: euphoriant Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1260  
Subject: Sec. 529 plan disclosure Date: 8/1/2001 3:12 PM
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Hello. I am considering setting up a Sec. 529 plan (College Savings Plan) for my daughter. My daughter will be the beneficiary of the plan. The plan will be funded from gifts that I make to my daughter. I will be the "account owner", but the funds will be hers.

Since the money in this account is not mine and I am not the beneficiary and I cannot take a loan out against the money, am I required to disclose that I am the owner of such a plan in any personal financial statements?

Thanks,
e
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Author: lisab500 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 891 of 1260
Subject: Re: Sec. 529 plan disclosure Date: 8/2/2001 2:55 PM
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I am considering setting up a Sec. 529 plan (College Savings Plan) for my daughter. My daughter will be the beneficiary of the plan. The plan will be funded from gifts that I make to my daughter. I will be the "account owner", but the funds will be hers.

Since the money in this account is not mine and I am not the beneficiary and I cannot take a loan out against the money, am I required to disclose that I am the owner of such a plan in any personal financial statements?


I wish I had more time to look through the info. I've collected, but a few thoughts from best recollection. Standard disclaimer - I'm not a lawyer, and below is only to the best of my lay-person understanding/recollection.

Foirst - you are the owner, so I think the money is yours. In any case, it's a Catch-22. If you are the owner, then whatever your "bequeathing" wishes, the BK court will have first dibs. If your daughter is the owner, then you just gave away something in order to shelter it from the BK estate. From Nolo's "How to File for Chapter 7 Bankruptcy"

"People contemplating bk are often tempted to unload their property on friends and relatives or pay favorite creditors beore they file. Don't bother. Property given away or paid out shortly before you file for bk is still park of your bk estate, and the trustee has legal authority to take it back."

I think an attorney will tell you that you'd be taking a HUGE legal risk to use up funds this way and then not disclose it. For one thing, interest on investments are automatically reported to the IRS. There are investments that I believe BK filers can sometimes (always?) keep, like certain personal retirement accounts like 401K. But if you are looking at changing anything about your finances with BK in mind, I'd really REALLY suggest you talk to an attorney first. The only negative I can think of to doing that, is that when you first start talking to a BK attorney, your creditors can point to that date as the date you "knew" that you were not going to make good on debts, and I believe that everything you do after that point can be looked at a little harder by the bankruptcy trustee.

Bottom line: do NOTHING with the intent of "getting one over" on the trustee. Losing $ is not as bad as losing your freedom!

LisaB

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Author: euphoriant Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 892 of 1260
Subject: Re: Sec. 529 plan disclosure Date: 8/2/2001 4:08 PM
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LisaB,

Thank you for your response. I agree with you completely when you said this: Bottom line: do NOTHING with the intent of "getting one over" on the trustee. Losing $ is not as bad as losing your freedom!

I do not have a current or forseeable need to declare bankruptcy and I hope things remain this way.

The way I understand the 529 (I'm not a lawyer either) I would own the account, but not the funds, nor would I be the beneficiary of the funds, nor am I allowed to use the funds as an asset against a loan. But, like you said, I'd be the owner of the account so it probably would need to be disclosed.

Thanks for helping me think this through.

e



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Author: lisab500 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 893 of 1260
Subject: Re: Sec. 529 plan disclosure Date: 8/2/2001 8:03 PM
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Thank you for your response. I agree with you completely when you said this: Bottom line: do NOTHING with the intent of "getting one over" on the trustee. Losing $ is not as bad as losing your freedom!

I do not have a current or forseeable need to declare bankruptcy and I hope things remain this way.


Then you're a worrywart? :-) (I say that, as a worrywart.) If you are long term looking at putting aside moneys for your daughter that (in whatever eventuality) can't be taken from you, legally, you might look into the various gift to minor accounts and so on that are discussed on the "saving for college" board. The downside of making an outright gift in trust is that you have to trust that your child will use it for it's intended purpose when she reaches the age of consent, and not to finance a Harley or whatever. If it becomes theirs at a certain age, it's theirs to blow away. But I imagine that after a certain # of months or years, such a gift would definately not fall into the pile of assets that *you* need to declare. (Your daughter, of course, would have to declare it on any of her financials, like college apps.)

LisaB

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Author: jsn7 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 904 of 1260
Subject: Re: Sec. 529 plan disclosure Date: 8/8/2001 10:11 AM
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euphorant,

You don'tsay where you live but, many lawyers say depending on your state ;aw the plain and simple IRA can be a great place to keep assets from creditors. State exemptions differ as you'll see from this url www.ici.org/issues/99_state_ira_bnkrptcy.html Of course, the usual warning about advice from a web site applies. See your own lawyer for proper guidance.
FWIW, my lawyer tells me my state has themost liberal IRA exemption in the country and he has handled many bk that had IRA's well into 6 figures and trustee never questioned it. He said the largest he has handled was $350k in 1999.

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Author: fringel Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 944 of 1260
Subject: Re: Sec. 529 plan disclosure Date: 10/4/2001 4:55 PM
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I agree--putting one over on a trustee is a crime. Its called Bankruptcy Fraud.

HOWEVER--have your lawyer check state law. In some states, contributions to a 529 plan for the benefit of a minor are exempt from creditors. make sure your lawyer looks at a recent copy of the relevant law--these plans are new as are the exemptions, in those states where they exist.

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