529 For my child: who should be the "owner" - me, my wife, or both of us

[HeyAnesthesia]

This is an important post that strayed a bit off topic. Does anyone have any insight into the original question (who should be the owner of the 529?).

[spiritrider]

The easy one. A 529 can not be a joint account.

ENT doc: already gave you a reference to 529 asset protection.

There is no practical operational difference whichever parent is the account owner. However, the account owner can make a non-qualified withdrawal of the entire account for their benefit.

So which do you worry about more. Asset protection or your wife running off to mexico with the 529 and the pool boy. If you are worried about both have each of you open an account and contribute 1/2 equally.

My suggestion is to have adequate malpractice/umbrella insurance and not worry about things beyond your control.

[q-school]

What if you pay your kids college and then later on use the leftovers on yourself. What if there is still some left, can that be transferred to grandchild without the generation skip? As if you gave it to the grandchild originally. Say fifteen years have passed since child last used it and you reclaimed the money. Also,Do you pay tax if you reclaim the money for yourself? I’m assuming no.

[spiritrider]

q-school wrote:

What if you pay your kids college and then later on use the leftovers on yourself. What if there is still some left, can that be transferred to grandchild without the generation skip? As if you gave it to the grandchild originally. Say fifteen years have passed since child last used it and you reclaimed the money. Also,Do you pay tax if you reclaim the money for yourself? I’m assuming no.

Click to expand...

Any change of beneficiary to a lower generation is subject to gift/GST reporting rules. This means you can transfer 5X annual exclusion every five years each from the account owner and spouse. There will not be any gift taxes unless/until you exceed the lifetime gift/estate tax exclusion. Now $11.2M with the tax reform.

Any non-qualified distribution will be subject a 10% penalty and ordinary income taxes on the earnings. This will be assessed on whoever receives the distribution and their marginal tax rate.

If you are not going to transfer/rollover the excess funds to another beneficiary, it is probably best for the current beneficiary to take the non-qualified distributions, because their marginal tax rate will likely be lower.

 

[LizOB]

Something to consider: some states (like VA) give you a state tax break up to a cap.... per account. So my husband and I each have an account for our son, which doubles our state tax deduction. I would look into whether your state does this also