529

Overview 

 Investopedia: if you have time for only article on 529's, START HERE -- link here.

Another good source: Schwab, link here.

Everything regarding 529's is in a state of flux. The following was accurate at the time of posting but things are in constant flux.

New: rolling over unused 529 assets into a Roth IRA for the beneficiary. Link here. I don't think there's anything new here, but this is from The Wall Street Journal and was dated September 13, 2024: link here.

Resources

• Link here for simple explanation of a 529.
• See Forbes. 
• Really nice explanation, adjusted for tax year 2023: link here.
  

Bottom line for a 529:

• no tax deductions; no benefits for the donor
• accounts grow tax-free; withdrawals tax-free if used for education
  
• annual donations allowed greatly exceed what any donor is likely to do
• beware of annual federal (IRS) gift tax 
• after 15 years, converts to a Roth IRA but annual "deductions" limited by annual limits
  

Other:

• the grandparent loophole: if the grandparent is the owner, does not count against beneficiary's federal aid

Other links:

• grandparents paying tuition for grandchildren, tax-free, no limits; link here.    
  

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Background

August 20, 2024:

Wow, wow, wow!

I started blogging about the incredible advantages of the "529" about six months ago. I can't say enough about 529s.

Now, today, Schwab has an article on 529s. Specifically "Grandparent-owned 529s." Link here. 

Individuals can also use 529s as a wealth-transfer vehicle. "Under current law, you can gift up to $18,000 per beneficiary per year to a 529 without dipping into your lifetime gift tax exclusion amount of up to $13.61 million in 2024," Chris says.

What's more, 529s have a special provision that allows you to contribute five years' worth of gifts in a single year if you treat them as happening over five consecutive years for tax purposes. That means a married couple could contribute up to $180,000 in 2024 to any number of eligible family members—though they won't be able to make additional contributions to those accounts for another five years.

Updates

October 8, 2024: it makes sense to have one "529" for all children -- it simplifies everything! Once the first child no longer needs funds from the existing "529", the beneficiary can be changed for the next child. With twins, it might make sense to have two "529's" simply because the need for funds might occur at same time and two "529's" might make it easier.

Original Post 

Personal investment links here:

• personal investing by the grandparents.
• the "529" page.

Philosophy:

• most important, Sophia, right now, because she is already ten years old
• next: Judah and Lev, four years old
• then: Arianna, for post-graduate education
• finally: Olivia, just in case

Note: 

• "529's" are incredibly flexible
• a beneficiary can be an owner
• only one "529" in one state for same owner / beneficiary
  
• if an owner has a "529" in one state for a certain beneficiary, a second "529" with same owner / beneficiary must be from a second state  
• an owner can have multiple 529 plans for different beneficiaries, meaning you can open separate 529 accounts for each of your children, even though a single 529 plan can only have one beneficiary at a time; you cannot name multiple beneficiaries on a single 529 account. 
• owner and beneficiary can be changed at any time with a simple signature by the owner
• one "529" for all children? Interesting concept. Link here.
  
• after a "529" has been in existence for 15 years, up to $35,000 can be converted into an Roth IRA but requires active income on the part of the beneficiary, and annual contributions within IRS rules
• if the owner is the grandparent, the “529” does not affect Federal financial aid;
• if folks understand the concept of the fungibility of cash it's hard to think of a better passive investment for many grandparents wishing to provide support for grandchildren
  

Grandparents' "529" allocation for the grandchildren:

• Sophia: 40%
• Judah: 20%
• Levi: 20%
• Arianna: 20%
• Olivia: 0%. Monthly stipend of $500 instead.

As of July 16, 2024:

• Judah: 
• parents have "529" established for Judah. Grandparents send contributions to the parents for his "529."
• one owner, one beneficiary, state: Laura, Judah, Schwab/Kansas program
• Levi: 
• parents have "529" established for Judah. Grandparents send contributions to the parents for his "529."
• one owner, one beneficiary, state: Laura, Levi, Schwab/Kansas program
  
• Sophia: 
•  "529" established by grandparents; contributions began in CY2024
• one owner, one beneficiary, state: Bruce, Sophia, Schwab/Kansas program
  
• Arianna: 
• no "529" established by grandparents yet. Would like to have that done by end of CY2024.
• Olivia: 
• no "529" established by grandparents yet. Using funds that would go to her "529" for living expenses at Stanford, but would like to start a "529" if for no other reason than the Roth-conversion benefit. Monthly stipend: $500.