529 Frequently Asked Questions Select a Category: Make A Selection General Prepaid Withdrawals Tax Ownership Investment Choosing a Plan Beneficiaries Coverdell Show All General 1. What is a 529 plan? 2. Can I set up an account for myself to go back to school when I retire? 3. If my child decides to go into the military and does not go to college, what becomes of the money in the account? 4. I already have some money invested in stocks can I move the stock into a 529 account? 5. Where can my child use the 529 funds? What if she wants to go to a foreign university? 6. Can I use the money that I have deposited in my child's 529 account as collateral for a loan? 7. How much do I need to save for my child’s college expenses? Withdrawals 1. How do I withdraw monies in payment for college? 2. May the 529 funds be used to purchase a computer? 3. What if my grandchild is awarded a scholarship and doesn't need the money that I have put in the 529 account? 4. What happens to the balance if my child graduates from college and has money left over in his/her 529 account? 5. Is there a minimum time period during which the account must be held before monies can be withdrawn? Tax 1. Are there any tax advantages to a 529 Plan? 2. What is the advantage of the 529 Plan over the Uniform Gift to Minor's Act (UGMA) or UTMA? 3. Who gets taxed when a withdrawal is not used for a “qualified education expense”? 4. If my 529 plan accounts decline in value and I take a distribution from the plans, can I deduct the loss on my tax return? 5. My twelve year old daughter inherited an IRA from her deceased grandmother. If I cash in the IRA and pay the taxes, may I open a 529 account with that money she inherited and use it for her college expenses? 6. What was all the discussion about “tax–free withdrawals being due to expire in 2010?” Was that the same as ‘sunset’? 7. Where can I find more information on federal tax benefits for paying for college? Ownership 1. Is there an advantage to having my child’s grandparents owning the 529 account? 2. How is a 529 account that I own treated if I declare bankruptcy? 3. What is the impact of owning a 529 on my child’s eligibility for financial aid? Investment 1. How are the 529 funds invested? 2. Is the investment guaranteed? 3. What is the minimum/maximum investment? 4. If my family situation changes, and therefore my investment objectives change, can I change to another 529 plan that better meets my needs? 5. If I move to a different state, can I change to a different 529 plan? 6. Why is the maximum amount I can contribute different in each state? Choosing a Plan 1. What are some points I should consider when comparing plans from different states? 2. Is it possible to live in one state, choose a plan sponsored by another state, and my child go to school in a state different from our residence or the headquarters of the 529 Plan? 3. Do I need to deal with a state agency when I choose a specific state's plan? Beneficiaries 1. Who is included in the definition of a beneficiary's immediate family? 1. Who can be a beneficiary? 2. Can a child be the beneficiary of more than one 529 account? Coverdell 1. What is a Coverdell Education Savings Account (CESA)? 2. How much can be contributed for each child in a given year? 3. What is a qualified expense? 4. Who may contribute to a Coverdell Education Savings Account? 5. Other than the Financial Organization, who are the parties involved in the CESA? 6. Am I allowed to change the beneficiary? 7. Do I have to pay taxes on the account earnings? 8. Who is a member of the family? 9. Can fund be rolled over from one CESA to another CESA established for another family member? 10. Can a CESA be rolled over to a 529 College Savings Plan? 11. Can funds from a Qualified Tuition Plan (529 Plan) be rolled over to a CESA? 12. How long can you make CESA contributions for the Designated Beneficiary? 13. What is the deadline for CESA contributions? 14. Why is the age 30 important? 15. Does the Designated Beneficiary get control of the money when he or she reaches the age of majority? 16. Do CESA’s mirror IRA’s in that the Contributor needs to have earned income? 17. What happens if the funds are not used for education purposes? 18. What happens if the annual contributions for a child exceed the $2,000 limit? 19. Are transfers between CESA’s non-reportable as they are with IRA’s? 20. What reporting is required to the financial organization in the case of a trustee-to-trustee transfer? 21. Will the CESA prevent me from taking advantage of other education savings options? 22. What are the tax consequences if the Designated Beneficiary doesn’t need the money because they have received a scholarship? 23. Are contributions to a CESA tax deductible? 24. What does the age waiver for a special needs beneficiary entail? Still Need Help? Ask An Expert Do you want guidance in selecting a 529 plan?  Click the Contact Us button below and speak to a live advisor, or drop us an email and we will be pleased to assist you. If you are a do-it-yourself person, click the Professor for his assistance in sorting and ranking plans or click on the National Map to locate a specific state's 529 program.
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