Connect Bridgeport
Ad
FacebookTwitterInstagramYouTubeRSS
  • Home
  • News
  • Sports
  • Community
    • Community News
    • Anniversaries
    • Announcements
    • Arts & Entertainment
    • Calendar
    • Churches
    • Clubs & Organizations
    • Directory
    • Farmer's Market
    • File Complaint
    • Greeting Cards
    • Library
    • Lost And Found
    • Obituaries
    • Parks & Recreation
    • Sponsorships
  • Trading Post
    • For Sale
    • Local Deals
    • Services
    • Yard Sales
  • Visitors
  • Relocation
  • Education
  • Jobs
  • Alumni
Ad

Financial Corner with Gabe Fiest: Rules on Opening a 529 Plan Account for College

By Gabriel Fiest on April 02, 2019 from Financial Corner with Gabe Fiest

Gabriel Fiest is an investment advisor representative with Voya Financial Advisors and an insurance agent with United Security Agency. His past positions include operations manager at CP Hospitality, executive director of Greater Bridgeport Convention and Visitors Bureau and recreation manager at Oglebay Resort. In this new blog, Fiest will be sharing important financial information - from opening college accounts and comparing retirement plans and everything in between. 
 
 
Rules on Opening a 529 Plan Account for College
 
Year over year, participation in 529 plans continues to rise. Anyone can open an account, lifetime contribution limits are typically over $300,000, and there are tax benefits if the funds are used for college. Here are some common questions on opening an account.
 
Can I open an account in any state's 529 plan or am I limited to my own state's plan?
 
Answer:It depends on the type of 529 plan you have: college savings plan or prepaid tuition plan. With a college savings plan, you open an individual investment account and direct your contributions to one or more of the plan's investment portfolios. With a prepaid tuition plan, you purchase education credits at today's prices and redeem them in the future for college tuition. Forty-nine states (all but Wyoming) offer one or more college savings plans, but only a few states offer prepaid tuition plans.
 
529 college savings plans are typically available to residents of any state, and funds can be used at any accredited college in the United States or abroad. But 529 prepaid tuition plans are typically limited to state residents and apply to in-state public colleges.
Why might you decide to open an account in another state's 529 college savings plan? The other plan might offer better investment options, lower management fees, a stronger investment track record, or better customer service. If you decide to go this route, keep in mind that some states may limit certain 529 plan tax benefits, such as a state income tax deduction for contributions, to residents who join the in-state plan.
 
Is there an age limit on who can be a beneficiary of a 529 account?
 
Answer:There is no beneficiary age limit specified in Section 529 of the Internal Revenue Code, but some states may impose one. You'll need to check the rules of each plan you're considering. Also, some states may require that the account be in place for a specified minimum length of time before funds can be withdrawn. This is important if you expect to make withdrawals quickly because the beneficiary is close to college age.
 
Can more than one 529 account be opened for the same child?
 
Answer:Yes. You (or anyone else) can open multiple 529 accounts for the same beneficiary, as long as you do so under different 529 plans (college savings plan or prepaid tuition plan). For example, you could open a college savings plan account with State A and State B for the same beneficiary, or you could open a college savings plan account and a prepaid tuition plan account with State A for the same beneficiary. But you can't open two college savings plan accounts in the same 529 plan in State A for the same beneficiary.
 
Also keep in mind that if you do open multiple 529 accounts for the same beneficiary, each plan has its own lifetime contribution limit, and contributions can't be made after the limit is reached. Some states consider the accounts in other states to determine whether the limit has been reached. For these states, the total balance of all plans (in all states) cannot exceed the maximum lifetime contribution limit.
 
Can I open a 529 account in anticipation of my future grandchild?
 
Answer: Technically, no, because the beneficiary must have a Social Security number. But you can do so in a roundabout way. First, you'll need to open an account and name as the beneficiary a family member who will be related to your future grandchild. Then when your grandchild is born, you (the account owner) can change the beneficiary to your grandchild. Check the details carefully of any plan you're considering because some plans may impose age restrictions on the beneficiary, such as being under age 21. This may pose a problem if you plan to name your adult son or daughter as the initial beneficiary.
 
What happens if I open a 529 plan in one state and then move to another state?
 
Answer: Essentially, nothing happens if you have a college savings plan. But most prepaid tuition plans require that either the account owner or the beneficiary be a resident of the state operating the plan. So if you move to another state, you may have to cash in the prepaid tuition plan.
 
If you have a college savings plan, you can simply leave the account open and keep contributing to it. Alternatively, you can switch 529 plans by rolling over the assets from that plan to a new 529 plan. You can keep the same beneficiary when you do the rollover (under IRS rules, you're allowed one 529 plan same-beneficiary rollover once every 12 months), but check the details of each plan for any potential restrictions. If you decide to stay with your original 529 plan, just remember that your new state might limit any potential 529 plan tax benefits to residents who participate in the in-state plan.
 
Read more of Fiest's blog posts HERE.

Share


Sign up/stay connected

Create your profile to start adding photos, posting comments, and more.

SIGN UP

Ad
Ad
Ad

Blogs [ view all ]

  • Photo

    From the Bench: Props to BHS Team One of...

    There have been plenty of great boys’ basketball teams in Bridgeport High School’s history. Certainly, thi...

    Posted by Jeff Toquinto

  • Photo

    Time Travel: Early 1980s Bridgeport Yout...

    See anyone you remember from this youth soccer photo from the very early 1980s - likely 1981 or 1982? The team...

    Posted by Dick Duez

  • Photo

    It's Happening: Baylor Comes Home

    Many have been following the journey of 2-year-old Baylor Waggamon since early-2025 when he was awaiting a heart transplan...

    Posted by Julie Perine

  • Photo

    The Grapevine: Enjoying the Wheeling Sym...

    Once again, the residents of Harrison County will have the opportunity to celebrate the Fourth of July with a performa...

    Posted by Rosalyn Queen

  • Photo

    ToquiNotes: Unlucky 13-Year Anniversary ...

    It was August 20, 1970, when what many will consider the worst storm in Bridgeport’s history took place. A torna...

    Posted by Jeff Toquinto

Calendar [ view all ]

Thu
10

Tech Savvy: Rebooted (Bridgeport Public Library)

Thu
10

Sew Simple: Lotus Flower Pin Cushion (Bridgeport Public Library)

Fri
11

Monthly Matinee: Mamma Mia! (2008) (Bridgeport Public Library)

 



Bridgeport, WV
Editorial Board Advertise Privacy Policy Contact Us
FacebookTwitterInstagramYouTubeRSS

©2014 Connect Bridgeport.