SA and 529 Fund tax planning

Discussion in 'Service Academy Parents' started by MidwestDad, Feb 23, 2017.

  1. mmb5

    mmb5 5-Year Member

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    Our tax attorney told us that changing beneficiaries is considered a "gift", subject to the annual limitation on gifts.
     
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  2. AROTC-dad

    AROTC-dad Moderator

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    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
     
  3. BlackKnight2016

    BlackKnight2016 5-Year Member

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    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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