Tax Question - 529 Plan
My grandparents set up a 529 Plan for me and my two brothers when I was very young. My parents eventually divorced and three 529 Plans were turned over to my father. My mother placed $25,000 each into our 529 Plans when she and my dad divorced.
My father took control of the 529 Plan and now the $25,000 my mother placed into each three sons 529 Plans has been taken out by my father (on all three sons accounts- $75,000 Total).
My father is signing over all the 529 Plan Accounts over to three sons and we are curious who is responsible financially for all the money my father took out? My mother told us taxes are taken out for early withdrawal from our 529 Plans? My mother indicated we will be responsible for paying taxes on the money my father took out. Is this true? Who is responsible for early withdrawal taxes? My dad is in the process of certifying we are now responsible for the 529 Plans. Who will be legally responsible to pay taxes for early withdrawal if these accounts are officially signed over to us?
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A recent interview style Q and A session appeared in Accounting Today featuring the expertise of author Iralma Pozo. In this series of questions, Pozo tackles some important aspects of the most significant change to the U.S. tax code since 1986. With such historic changes underway, it’s critical that you understand how the Tax Cuts and Job Act will affect cash flow issues for clients.

What’s particularly insightful is Pozo’s advice regarding parents and what they need to know about 529 plans. Her observations about developing a new strategy for charitable deductions and nonprofit organizations are also highlights:

With So Many Changes And Factors, Where Do Advisors Start? Read More

Who controls the funds held in a Section 529 qualified tuition account? These accounts can become quite large, as they are limited only by the projected cost of a college education, and those costs will vary between state plans. Some states base their maximums on the cost of an in-state, four-year education, but others use the cost of the most expensive schools in the U.S.—including graduate studies. Most have limits in excess of $200,000, and some can reach $475,000 or more. Thus, it is only natural that those who fund an account would be concerned about who controls the account’s distributions. Read More