529s are useful accounts for parents with kids who are likely to go to college. That being said, the rules and regulations are not well known and parents are rightly concerned about flexibility within these accounts. Here are some answers to some commonly-asked questions regarding 529s:
How much will I be able to contribute?
- You and your spouse will be able to make separate gifts of $16,000 to each child ($32,000 per child) in 2022. You can expect these contribution limits to be revised upwards over time.
If the 529 money goes unused, am I able to reassign those assets to another child?
- Yes, you will be able to contribute to one child’s 529, and then reassign that 529 to another child if funds have not been fully utilized.
What are my options if funds go unused and I don’t have another child to reassign those assets to?
- If your child earns a scholarship, you can withdraw the scholarship dollar amount without penalty though you will pay income tax on the earnings portion of that dollar amount.
- If you withdraw the funds for a non-qualified withdrawal you will pay income tax on the earnings portion withdrawn in addition to paying a 10% penalty on the earnings portion.
- Alternatively, your child could reassign that account to a future child.
If you have additional questions regarding 529s and how you can use them for education savings, feel free to send me an email at [email protected].