-You can contribute at your convenience and set up an automatic payment plan through your bank or payroll. What is the most efficient way to gift money to young relatives? You could set up an investment account in your name earmarked for your grandchildren. We'd like to set up a college fund for our grandchildren. Ways grandparents can help pay for college. Single Predicate Check Constraint Gives Constant Scan but Two Predicate Constraint does not. And while its not the worst problem to have, it is possible to have too much money saved for college. When you purchase through links on our site, we may earn an affiliate commission. Unlike retirement savings accounts, 529 plans do not have annual dollar limit on contributions. If you do find out the SSN without letting your sibling know, you risk them thinking you're trying to steal the child's identity if they do find out. Reddit and its partners use cookies and similar technologies to provide you with a better experience. So establish the 529 account in their name, not in yours. My brother and sister-in-law are expecting a baby girl in a few months, and Id like to set up a custodial account or a 529 college-savings plan for my niece. Talk to the Parents You can open a college 529 account for pretty much anyone, as long as you have their Social Security number. What college-savings plan would give us the most flexibility? Or you could open a 529 college-savings plan for your niece as soon as she is born and has a Social Security number. Here are the ABCs of 529 plan benefits to consider: At the college or graduate level, funds from a 529 plan can be used for tuition, fees, books, supplies, approved study equipment, and room and board for a full-time student at an accredited institution. You will need the 529 plan beneficiarys date of birth and Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) at the time of enrollment. Congratulations! But what if you end up with too much in one account and not enough in the other? College saving for your grandchild (or niece or nephew or ). I'm suggesting obtaining them. For 2019, you can give another individual up to $15,000 before you trigger the gift tax. For do-it-yourself investors, Kiplinger's likes the College Savings Plan of Nebraska. If I wanted to start a 529 plan for them now to give to them at the end of their high school career as a surprise to both them and their parents, is it possible to do so? The child will likely make choices with their life based on, among other things, how much money they expect to have saved for college, which can begin years before college itself. A financial professional can help navigate the requirements in such circumstances. A. Do I need to start a 529 plan for each child (2 separate plans), or can I just open one 529 plan and let both children use it? AboveBoard's Favorite No-Minimum 529 Plans. By Alexandra Svokos :) Need to know more about the plan your state offers? 3 Reasons to Invest in an Out-of-State 529 Plan - U.S. News Be aware that a trust may increase the complexity and cost depending on structure and who is named as trustee, he added. The easiest option may be to write a check directly to the beneficiary or his/her parents so that it can be put in the 529 plan. This site is protected by reCAPTCHA and the Google, AboveBoard Financial 2023 But a benefit is that you can remove them as a policy beneficiary at any time. Disclaimer: The content on this site is for informational and educational purposes only and should not be construed as professional financial advice. Children younger than 18 years old cant own securities and other monetary assets except through a custodial account or a trust. Charitable organizations may use the 529 plan to fund scholarships, in which case the beneficiary will be named when the recipient is chosen and distributions are made. Changing Beneficiary on a 529 Plan: How and When to Do It - The Balance By Erin Bendig But those named in Roth IRAs must have earned income and file income tax returns, something not always usual for children. 529 plans can also be used as an estate-planning tool for grandparents, since the value of the account is removed from your taxable estate. Published 16 September 22. That is great! Student Loans Before doing anything, you should talk to the childs parents. Actually, you have things exactly reversed. Most 529 plans require the account owner to be a U.S. citizen or a resident alien who has a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). What is a good vehicle to do ad-hoc savings for kids' college? Any merit in this? You can open a college 529 account for pretty much anyone, as long as you have their Social Security number. The only consequence of taking a non-qualified distribution is that the earnings portion of a non-qualified distribution is subject to income tax and a 10% penalty. (Learn more: Section 529 Plans). Section 529, IRS Publication 970 and their pattern and practice, indicates the laptop purchase this year by the OP's niece is definitely not a qualified education expense. I want to save for my nieces' and nephew's college, but their - Reddit You certainly can. I heard that it's better to have a 529 account owned by the child rather than the parent so that it's not considered the parent's asset in determining financial need. What is the difference between grants and scholarships? Christopher Nolan's latest blockbuster movie "Oppenheimer" has sparked controversy among the Hindu-right in India, with some calling for a boycott and demanding the removal of a sex scene in . (Learn more: Understanding cash value). Read more about that in our Complete Guide to 529 Plans). On what basis do some translations render hypostasis in Hebrews 1:3 as "substance?". Plus, having too many savings accounts can be confusing when it comes time to pay for college. Her work can be found on sites such as Investopedia, Credit Karma, Quicken, The Balance, Motley Fool, and more, covering a range of topics such as family finances, planning for the future, optimizing credit, and getting out of debt. Were all of the "good" terminators played by Arnold Schwarzenegger completely separate machines? Published 10 October 22. college If your child is close to college age and their college fund has taken a hit in the market, theres one thing you should think about doing. But in 10 of these states, income tax benefits are only available to 529 plan account owners who contribute to their own 529 plan. rev2023.7.27.43548. When comparing 529 plans, experts recommend looking at how the plan has performed over the last three years. Do you know how much youre able to contribute or what the funds could be used to pay for? Many states, such as Ohio, let residents deduct their 529 contributions to the state's plans even if they are not the account owner. Give the child you love a head start on college! A 529 plan affects a students eligibility for financial aid, but the amount of the impact varies depending on who owns the account and when distributions are taken. Future US, Inc. Full 7th Floor, 130 West 42nd Street, You can only list a single beneficiary on each 529 plan account, and your life will be so much easier when it comes time to pay for college if the name of the beneficiary matches the child whose bills you are paying. @Mindwin It's not a loophole, it is intended. Most states will only offer benefits for residents who use their home states plan, but if you live in Arizona, Arkansas, Kansas, Maine, Minnesota, Missouri, Montana, Ohio or Pennsylvania you can claim a deduction for contributions to any states 529 plan. Yes, grandparents can claim the deduction for contributing to a 529 if they live in one of the 34 states that offer a state income tax . For example, if they already have a college savings account set up, you could simply give them money to put in it. The latest articles and tips to help parents stay on track with saving and paying for college, delivered to your inbox every week. Opinions are the author's alone. And can I set up a custodial account for her, even though Im not her parent? It's free and easy. You can open an account at any time, and at any time you can change who the beneficiary is. Your privacy is important to us. These college savings plans have become a popular choice for families because they're easy to use, they offer tax-free investment growth and, in some cases, you can claim a state tax deduction for your contributions. Sex scene with Florence Pugh in 'Oppenheimer' becomes latest target of By Kelley R. Taylor @wnnmaw I'm not suggesting obtaining their SSNs without permission from the parents. That means you would be able to make a $85,000 ($170,000 if married and filing jointly) contribution per grandchild in one year! Otherwise, the government hits the withdrawals with steep penalties and fees. And while you might think of surprising them in order to avoid them making more selfish choices - if they know you're good for $75k (let's say) then that's 3 more European vacations they can take, right? Advertiser Disclosure: The offers that appear on this site are from companies from which DoughRoller receives compensation. 529 Plans What if I don't use my 529? Can I open an account for my niece? But what if their parents havent started saving for college yet? Another option is to contribute directly to the plan if it allows third-party contributions. Then you can surprise the college-bound person again in eighteen years. A 529 account would probably also work in your situation. But if she doesn't attend college, we'd like to be able to use the money as a nest egg to start her life. Money you've saved in a 529 account for yourself will still be reachable in most cases by creditors - while I'm sure you hope to never have to worry about that, you never know what might happen with your life. Yes, even though you arent her parent, you can set up a custodial account or a 529 for your niece, but youll have to wait until she is born and has a Social Security number before you can open the account in her name. This is instead of opening a 529 for myself and . Second, if you're going to actually give the money to the child, you should do so as early as possible in order to avoid risks related to bankruptcy or lawsuits against you. Why is an arrow pointing through a glass of water only flipped vertically but not horizontally? Look at that, you can sit tight and wait for grandkids to arrive on the scene. Join two objects with perfect edge-flow at any stage of modelling? Depending on circumstances, some godparents, aunts, uncles, and others may want to consider setting up a Roth IRA, transfer account, or trust for that special youngster. Some parents who have larger plan balances might be tempted to hold some of it back to pay for their child's future graduate or professional school. You do not have to be a family member of the beneficiary to contribute to their 529 plan. Starting a young person in their adult life with good financial advice is a gift that will keep giving for decades, said CFP professional Kristi Sullivan, owner of Sullivan Financial Planning in Denver. *** Gifts in excess of these amounts may be subject to federal gift tax. Kiplinger is part of Future plc, an international media group and leading digital publisher. This is especially true if multiple people are putting money aside. For example, the child could use a life insurance policy loan to help pay for college. Can I open a bank account for my nieces? (2023) - Investguiding There are a few things to consider before opening a bank account for an niece. MORE: Everything You Need to Know About 529 Plans. These are 3 big mistakes you can make with a 529 plan To that end, a great gift is an hour or two with a financial professional. Is this merely the process of the node syncing with the network? You do need to provide a social security number for the beneficiary of the 529 plan, so to name your niece and nephew as beneficiaries, you will need to get their social security numbers. You can also potentially save the parents and child big hassles: what if, heaven forbid, you die in the meantime? | This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). In most states, a trust, corporation, non-profit or government entity can also open an account. Last updated 6 October 22. She graduated with four degrees in International Relations, Business, Spanish and French from The Pennsylvania State University, and is currently working towards a certification in Event and Wedding Planning.Consider giving securities, 529 plans or IRA instead of fancy designer giftsGiving non-traditional gifts, such as money, securities or savings bonds is a lot less stressful than trying to find a pair of fancy shoes for your style-conscious teenage niece or nephew. (Related: Beneficiary mistakes). NY 10036. Here are the steps youll need in order to get started: Deal of the Day: Chase is now offering a $200 cash bonus when opening a Total Checking Account. The Secure 2.0 Act, which passed into law late last year, created this new . You can check out our Complete Guide to 529 Plans for more information on this. Would you welcome an answer discussing whether this is a good idea or not (the idea of surprising them with this), or are you solely looking for if it is, @Daniel: It won't affect financial aid in the first year (because it's neither parental nor student assets), but when it's drawn upon, it will count as. 2) Brother, sister, stepbrother, or stepsister. 23 WARNING -- Giving your niece & nephew "money for college" will mean they have money which will mean they will get less financial aid. You can open an account now and make the childs parents or other eligible relative the beneficiary. The Education Savings Bond Program allows Series EE and I bonds purchased after 1989 by someone age 24 or older to be redeemed tax-free when the proceeds are used to pay for higher education, including contributions to a 529 plan. If you dont feel comfortable broaching the topic with the parents before Christmas or want to keep your gift a secret, you do have another option: a gift card. Our AboveBoard College Savings Guide will tell you. Money and children: Teaching by age groups, Possible college gifting moves for your grandchildren, 7 financial gifts for the college graduate, ________________________________________________. What's the best 529 plan? See Teaching Kids About Investing for more information about custodial accounts and a list of some brokerage firms and fund companies with low fees. 444 Brickell Avenue, Suite 820 Miami, FL 33131. Kiplinger is part of Future plc, an international media group and leading digital publisher. For more information, please see our Opinions expressed here are author's alone, not those of the bank, credit card issuer, or other advertiser, and have not been reviewed, approved or otherwise endorsed by the advertiser. If you contribute more than $13,000 to the childs custodial account in 2011 (or $26,000 from a married couple), you could be subject to gift taxes. Thanks! Youll soon be able to roll over funds from your 529 plan into a Roth IRA, thanks to recent legislation. (Related: Custodial accounts and Coverdells: How to use them). With the revolt against bank fees in the news, I thought it was a good time to highlight some free checking account options. Mortgages Looking to start a self-directed investment (College Savings) account for a niece in a different state (CT), but not screw her over with taxes/FAFSA down the road. (Learn more: Is a trust right for you?). New comments cannot be posted and votes cannot be cast. Contributing Editor, Kiplinger's Personal Finance, Mortgage Rates and Payments Keep Rising, Creating Market Misery, Your Europe Trip Is About to Get More Complicated, 529 Plans Get a Boost With Tax-Free Rollovers to Roth IRAs, Student Loan Forgiveness Blocked For Now Due to Court Rulings, College 529 Savings Plans: What You Need to Know, College 529 Savings Plans: How to Get the Most Out of Them, For 529 Plans in a Bear Market, Timing Is Everything.
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