SA and 529 Fund tax planning

Our tax attorney told us that changing beneficiaries is considered a "gift", subject to the annual limitation on gifts.
 
In 2017, The annual gift exclusion is $14,000. This is subject to change each year. However it is important to note that no gift tax is owed on gifts up to $5.49M per person. You have to file an IRS form 709 for annual gifts exceeding $14,000.

Under $14,000 no form is required.

Source: https://www.irs.gov/instructions/i709/ch01.html
 
We took the distributions out of the 529 plan rather than waiting to hand down to his future children. Let DS pay the taxes on the small earnings (without the 10% penalty) and used the cash proceeds to start funding his Roth IRA. They earn upwards of 10,000 in taxable wages each year for their 4 years. With recognizable taxable wages, this allows funding the IRA and upon graduation he had a 20K retirement nest egg started.
 
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