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529 Plans - Advice
Posted on 12/11/19 at 10:44 am
Posted on 12/11/19 at 10:44 am
We have one child who is 2 and another one coming along the way. I'm looking at setting up a 529 Plan, and have a few questions.
1.) Do I need just one plan and name the oldest the beneficiary, or should I set up 2 Plans for both?
2.) We are in South Carolina. Does it matter which state I set it up in? For ease, let's say both go to college in Louisiana/LSU. If I set up the 529 Plan in South Carolina, and they both go to LSU, does it transfer to Louisiana?
3.) If I can set it up in any state, are there certain states that are better/cheaper/less fees? If so, which? Is there a list?
4.) Let's say both get full-rides to LSU. What then happens to the plan? I understand that it is strictly for educational purposes (K-12, college, and graduate school).
5.) How much should I initially invest/put in when establishing? For example, if I initially put down $50,000 (not happening
) - would it be subject to gift tax?
1.) Do I need just one plan and name the oldest the beneficiary, or should I set up 2 Plans for both?
2.) We are in South Carolina. Does it matter which state I set it up in? For ease, let's say both go to college in Louisiana/LSU. If I set up the 529 Plan in South Carolina, and they both go to LSU, does it transfer to Louisiana?
3.) If I can set it up in any state, are there certain states that are better/cheaper/less fees? If so, which? Is there a list?
4.) Let's say both get full-rides to LSU. What then happens to the plan? I understand that it is strictly for educational purposes (K-12, college, and graduate school).
5.) How much should I initially invest/put in when establishing? For example, if I initially put down $50,000 (not happening
) - would it be subject to gift tax? This post was edited on 12/11/19 at 10:51 am
7
Posted on 12/11/19 at 10:55 am to LSUbase13
529’s are very flexible and have nothing to do with where the education takes place. You can use the money for education related expenses from what I recall.
Posted on 12/11/19 at 12:05 pm to LSUbase13
If you contribute to the SC 529 you can deduct it from your SC state taxes. Other states may have better options but you wont get the deduction as A SC resident.
If your kid gets a scholarship, you can take tax & penalty free withdrawals to cover remaining expenses and/or non-qualified withdrawals up to the amount of the scholarship can be taken out penalty-free, but you pay tax on the earnings.
If your kid gets a scholarship, you can take tax & penalty free withdrawals to cover remaining expenses and/or non-qualified withdrawals up to the amount of the scholarship can be taken out penalty-free, but you pay tax on the earnings.
This post was edited on 12/11/19 at 1:51 pm
Posted on 12/11/19 at 2:35 pm to LSUbase13
1. Open up one for each child. You should get some tax savings from your SC state taxes and there will be a max allowable deduction per year per child.
2/3. Open it in your state of residence to take advantage of any potential match and tax savings. It can move with you if you move.
4. You can use the money to cover additional expenses which may include things like rent, buying a place to live, computer, etc.. Other options including just withdrawing the funds with a penalty or changing the beneficiary to a grandchild and just start saving for them.
5. Don’t know. Seems like this answer will change based on individual’s financial situations.
2/3. Open it in your state of residence to take advantage of any potential match and tax savings. It can move with you if you move.
4. You can use the money to cover additional expenses which may include things like rent, buying a place to live, computer, etc.. Other options including just withdrawing the funds with a penalty or changing the beneficiary to a grandchild and just start saving for them.
5. Don’t know. Seems like this answer will change based on individual’s financial situations.
Posted on 12/11/19 at 3:20 pm to LSUbase13
Preface: I am not a financial advisor
I would set up one in each kids name.
Not familiar with SC, but Nevada seems to be a popular state for 529s.
I think Nevada is popular because they have low fees.
Check your state’s laws on 529s for K-12. I don’t think all states allow you to use 529s for K-12.
There are limits for annual contributions and cap on the total amount. Let grandparents and others that may contribute that you have 529s set up. They can donate directly. I started each kid off with $5k at birth and $100/month from then on.
I would set up one in each kids name.
Not familiar with SC, but Nevada seems to be a popular state for 529s.
I think Nevada is popular because they have low fees.
Check your state’s laws on 529s for K-12. I don’t think all states allow you to use 529s for K-12.
There are limits for annual contributions and cap on the total amount. Let grandparents and others that may contribute that you have 529s set up. They can donate directly. I started each kid off with $5k at birth and $100/month from then on.
Posted on 12/11/19 at 3:32 pm to LSUbase13
1. Set up one for each child.
2. Most states offer a deduction on state taxes so it is better to set it up in your home state. If your state plan sucks, get the deduction and then transfer it to a different state's plan. When the money comes out, it doesn't matter what state it is spent in as long as it i a qualifying expense.
3. See above.
4. Educational purposes but that also includes room, board, books, etc beyond tuition. Schools set guidelines on what is allowable in their cost of attendance section because room and board at NYU will be much more expensive than LSU. You can also now use it for private school tuition. If you can't find anything to spend it on I believe you can transfer to someone else (grandchild?) but I don't know all the rules on that.
5. In Alabama, you can put in a pretty high amount ($100k+) but you only get the deduction on $10k per year so that is what most people do.
2. Most states offer a deduction on state taxes so it is better to set it up in your home state. If your state plan sucks, get the deduction and then transfer it to a different state's plan. When the money comes out, it doesn't matter what state it is spent in as long as it i a qualifying expense.
3. See above.
4. Educational purposes but that also includes room, board, books, etc beyond tuition. Schools set guidelines on what is allowable in their cost of attendance section because room and board at NYU will be much more expensive than LSU. You can also now use it for private school tuition. If you can't find anything to spend it on I believe you can transfer to someone else (grandchild?) but I don't know all the rules on that.
5. In Alabama, you can put in a pretty high amount ($100k+) but you only get the deduction on $10k per year so that is what most people do.
Posted on 12/11/19 at 7:16 pm to LSUbase13
Not a gift tax since it would be considered front loading.
Posted on 12/11/19 at 9:18 pm to TorchtheFlyingTiger
quote:
If you contribute to the SC 529 you can deduct it from your SC state taxes
^many states have income limits on “tax deduction.”
In general, I would recommend saving for retirement first by maxing (or at least getting any match) all accounts you might have access to including 403b, 457, and SEP IRA.
I think the Roth May have an education avenue as well. It involves withdrawing “contributions”.
For the kids college I did Coverdell IRAs and 529s. I quit saving for college after about 8 years and still had 80K for each. Anyone can give to your kids 529. Some grandparents like doing this. Other relatives as well.
My kids are both in college and both got scholarships. One of them got an incredible scholarship so it all worked out.
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