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  • #16
    Originally posted by chucki View Post
    I thought superfunding referred to a lump sum such as 150k all at once (2 parent limit at 30k x 5 years) as opposed to maxing (30k/yr in this scenario).
    That is indeed what people usually mean.

    However, as OP explains you can do more that than. There is a consequence, but it is relatively minor in the grand scheme of things.

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    • #17
      Originally posted by AR View Post

      Is this mandatory or is it just something that is a good idea to do?
      Both. It’s required if you give more than the allowed annual threshold and, if you’re uncertain whether to do it or not, it is definitely a good idea to do because the SOL (Statute of Limitations) does not close on unfiled returns. Potentially, a large estate could have gifts from many years prior - along with all related growth - be pulled back into the estate to be taxed at a rate beginning at 40%. So easy to avoid by filing a simple - and it is simple - gift tax return. Note that estates that are large enough to be taxable have a proportionately high audit rate.
      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #18
        Originally posted by wideopenspaces View Post
        Wait, there are limits to how much you can put in a 529 each year? To this point we have only done 4k/kid/year but were planning to significantly increase that amount in the next 3 years to catch up. Can someone clarify what the limits are?
        it varies by state, but once the balance in a 529 reaches a certain point, you actually are not allowed to contribute anymore to it

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        • #19
          Originally posted by jfoxcpacfp View Post

          Both. It’s required if you give more than the allowed annual threshold and, if you’re uncertain whether to do it or not, it is definitely a good idea to do because the SOL (Statute of Limitations) does not close on unfiled returns. Potentially, a large estate could have gifts from many years prior - along with all related growth - be pulled back into the estate to be taxed at a rate beginning at 40%. So easy to avoid by filing a simple - and it is simple - gift tax return. Note that estates that are large enough to be taxable have a proportionately high audit rate.
          So for 15K or less it is not required? Is that correct?

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          • #20
            Originally posted by JBME View Post

            it varies by state, but once the balance in a 529 reaches a certain point, you actually are not allowed to contribute anymore to it
            Good to know. I don't think we'll need to worry too much about that. I know some people put like 200k in the 529 but we won't be putting that much in!

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            • #21
              Originally posted by AR View Post

              So for 15K or less it is not required? Is that correct?
              Per donor per donee. So 30k from two parents per each child.

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              • #22
                Originally posted by AR View Post

                So for 15K or less it is not required? Is that correct?
                That is correct. See ENT Doc’s comment above. I believe there is confusion over what makes up the $15k, though. So, if you contribute only $10k and give your child $10k for birthday, then you need to file a gift tax return but only $5k will ultimately count against your lifetime exclusion.

                “gifting” to a child is also confusing because the line between parental “support” and a gift is very blurry. For example, if you pay $50k tuition to Northwestern, that is not considered a gift, but support (nonreportable). If you run that same $50k through a 529 and then pay the tuition from the 529, your initial contribution is a gift. This is a fairly clear-cut example but there are many more difficult - such as if you buy your child a $50k car for his/her birthday. If they are < the age of majority, I would argue not reportable. If over, then yes, reportable.
                Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                • #23
                  I just do the $10k for state deduction, then taxable account. More flexibility and we should be able to cash-flow college anyway unless we FIRE

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                  • #24
                    If the goal is to completely fund your child's education without having to cash flow any of it, how much would you want in the fund? What's the maximum amount (nuclear option of private ugrad + grad school)? About 5 years away average for 2 kids.

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                    • #25
                      Originally posted by chucki View Post
                      If the goal is to completely fund your child's education without having to cash flow any of it, how much would you want in the fund? What's the maximum amount (nuclear option of private ugrad + grad school)? About 5 years away average for 2 kids.
                      Google Vanguard college cost calculator and you can plug in specific schools. Undergrad at least.

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                      • #26
                        Originally posted by jfoxcpacfp View Post
                        “gifting” to a child is also confusing because the line between parental “support” and a gift is very blurry. .... - such as if you buy your child a $50k car for his/her birthday. If they are < the age of majority, I would argue not reportable. If over, then yes, reportable.
                        Whew! Guess if car prices keep rising I may have to buy the 21 year old (who delayed receiving a new car to keep driving Dad's old, and now worthless but drivable after thieves cut through the convertible top and frame, sports car) that sometime in the future new car with gifts over two years time. Maybe if I start a new car fund in her name she'll finally give up on that anxiety (to Mom) producing near wreck. Or she'll use the money for grad school and then still hope for/ need new car money down the road.

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                        • #27
                          Too lazy to look this up. What are the best ways to get excess money out of a 529? Assume there are no other relatives available going to college. That is what I usually hear but some people have small families where transferring 529s beyond the nuclear unit is not an appealing option.

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                          • #28
                            Originally posted by Lithium View Post
                            Too lazy to look this up. What are the best ways to get excess money out of a 529? Assume there are no other relatives available going to college. That is what I usually hear but some people have small families where transferring 529s beyond the nuclear unit is not an appealing option.
                            I read here that after 24yo you can transfer the ownership of the account to your kids completely and they then can use the money for anything, but will only be charged capital gains at their tax bracket. Tentatively this looks promising to us if this is true.

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                            • #29
                              Originally posted by ObgynMD View Post

                              I read here that after 24yo you can transfer the ownership of the account to your kids completely and they then can use the money for anything, but will only be charged capital gains at their tax bracket. Tentatively this looks promising to us if this is true.
                              • You can change the beneficiary to a specific person in your immediate family (this d/n count a step transaction, such as to a grandchild) once annually w/o any tax ramifications.
                                • Iow, for ex, you can make 2 trsfs annually to 2 separate siblings.
                              • Original contributions distributed from the account are not taxable.
                              • Income distributed from the account is taxable at your top marginal rate (no CG treatment - w/like to know where you read that). State taxes apply, too (don’t ask me what to do if you’ve moved states unless you’re a client bc I’m not going on that wild goose chase, prob depends on state rules)
                              • Distributions of earnings not used for qualified purposes (unless the bene got a scholarship to equal the total amt dist’d, including growth/income) are also subject to a 10% penalty and an additional 2.5% penalty in the great state of CA.
                              • Distributions are prorated between growth/income and basis, you cannot pick and choose.
                              • I don’t know what you are referring to about age 24 - hopefully that information will also be supplied in the link to where you read this on WCI or someone else can jump in and confirm.
                              Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                              • #30
                                Originally posted by jfoxcpacfp View Post
                                • You can change the beneficiary to a specific person in your immediate family (this d/n count a step transaction, such as to a grandchild) once annually w/o any tax ramifications.
                                  • Iow, for ex, you can make 2 trsfs annually to 2 separate siblings.
                                • Original contributions distributed from the account are not taxable.
                                • Income distributed from the account is taxable at your top marginal rate (no CG treatment - w/like to know where you read that). State taxes apply, too (don’t ask me what to do if you’ve moved states unless you’re a client bc I’m not going on that wild goose chase, prob depends on state rules)
                                • Distributions of earnings not used for qualified purposes (unless the bene got a scholarship to equal the total amt dist’d, including growth/income) are also subject to a 10% penalty and an additional 2.5% penalty in the great state of CA.
                                • Distributions are prorated between growth/income and basis, you cannot pick and choose.
                                • I don’t know what you are referring to about age 24 - hopefully that information will also be supplied in the link to where you read this on WCI or someone else can jump in and confirm.
                                This is the link where I read about the 24yo situation on this forum. I haven’t looked into it more because this is decades away for our kids.

                                https://forum.whitecoatinvestor.com/...9-excess/page2

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