529 college savings plan - FAQ?
Can I change my investment election?Yes. Current tax law allows plan participants to reallocate their investment selections for previously made contributions once per calendar year. Account owners can change the allocation of future contributions at any time.Can I transfer my UGMA/UTMA account into a 529 plan? Yes, provided that certain requirements are met. First, assets in an UGMA/UTMA account must be liquidated, since 529 plan accounts accept only cash contributions. You should check with your tax advisor regarding such a liquidation. Also, a Future Scholar 529 College Savings Plan account receiving assets from an UGMA/UTMA liquidation will have restrictions not present on an account that is registered otherwise. All withdrawals from the account must be made for the benefit of the beneficiary. If the withdrawal is not used for educational expenses for the designated beneficiary, federal and possibly state taxes and a 10% federal penalty will apply to the nonqualified withdrawal. The transfer of assets held in a 529 plan is irrevocable under an UGMA/UTMA registration, and the beneficiary will assume control of the assets upon reaching the age of majority.
Can I roll my existing Coverdell Education Savings Account into a 529 plan account?Yes, subject to restrictions. Because 529 plan accounts accept only cash contributions, assets in a Coverdell account must be liquidated to accomplish the transfer. Because taking a distribution from your Coverdell account to invest in a 529 plan is considered a qualified withdrawal, it is not a taxable event for federal tax purposes.
Can I choose my own investments 529 Plans offer a variety of investment options, from single funds to age-based portfolios. Please remember there's always the potential of losing money when you invest in securities.
What if I need to use the money in my 529 plan for other higher education related expenses?Assets held in a 529 Plan can be withdrawn at the discretion of the account owner. However, earnings on withdrawals to cover expenses other than qualified education expenses will be subject to taxes as ordinary income and, in most cases, a 10% federal penalty.
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