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529 Question

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  • 529 Question

    A) I don't have any children. Am I allowed to open/own a 529 plan and designate MYSELF as the beneficiary of the plan? I plan on earning an MBA some time in the future and perhaps even in retirement going back to school for other post-graduate degrees. So yes, I do have foreseeable future educational expenditures (my tuition, fees, books, etc) that I could use the 529 plan towards.

    B) If I can open a 529 plan and designate myself as the beneficiary is there a max YEARLY contribution limit for me? I understand a single person can only contribute 14k/year when someone else is the beneficiary of the plan without getting into gift tax issues. Also, since the 529 plan would be for myself can I open it with a max contribution of around 350k (which is around the max total contribution limit for these plans in many states)?

    C) Also, if I designate myself a beneficiary do I have the same creditor protections (in Texas and federal court) that I would have if the beneficiary were a child or grandchild?

    Many thanks in advance for any insight!



  • #2
    Yes, you can open a 529 for yourself. There is no limit that I know of since you are not making a gift, just depositing the money in an account owned by you. I do not know if you can redesignate more than $14k/year at one time to your child, however. I suspect not, but I can't find information either way.

    19 states provide some protection for 529 accounts, but the amount of protection by ownership status varies from state to state. Morningstar has a list but I'm not sure how current it is - best to research your state laws.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


    • #3
      I'm confused, I understand wanting to go back to school one day, and sure, taking advantage of the tax code and all.... but are you really going to spend $350k on another degree??  That seems like a lot.


      • #4
        I probably won't spend all 350k (more like 500k after 20 years of tax free growth) on myself. Although I could conceive of some exciting study abroad programs to pursue (remember tuition/fees, meal plans and room/board all count as qualified expenses). In the event I don't use all the 529 funds for myself I'll simply change the beneficiary to one of my lovely nieces or nephews. To avoid any gift tax consequences I'll probably fund the plan step wise 14k/year. Also don't forget these plans provide creditor protection. Less confused?


        • #5
          Changing a beneficiary on a 529 can definitely result in incurring gift tax or generation-skipping tax.  Granted, you shouldn't actually pay any tax until you've wiped out your applicable exclusion amounts, but changing an beneficiary from yourself to another person could definitely be a taxable event.  You should consult with a qualified CPA or attorney in your area.


          • #6

            can I open it with a max contribution of around 350k (which is around the max total contribution limit for these plans in many states)?
            Click to expand...

            To avoid triggering gift taxes you can only contribute $70K as a lump sum and elect to spread it over 5 years on your tax return ($14K x 5). Otherwise you will owe git taxes. If a spouse contributes the limit is raised to $140K.




            • #7
              ok thanks!