Section 529 Plans: Introductory Q And A’s, Part 2
Split your contributions
My state offers a tax deduction for the first $2,ooo deposited in its 529 plan, but I prefer the investment options in another state's plan. Can I contribute $2,000 to my state's plan to get the deduction and then put another $8, ooo in the other state's plan? Can I put $2,000 in my state's plan, claim the deduction, and then shift the money to the other plan?
There's no problem splitting your contributions among different states' plans. But check the deductibility rules carefully. Some states let each spouse take an income-tax deduction for contributions, so you might double your deduction by opening up two accounts in your own state before moving on to another one. Your claim-the-deduction-then-move-the-money strategy might work, Hurley says, but some states "recapture" the tax savings. Again, you'll have to check with the specific plan's administrator.
Control the plan
If multiple individuals contribute to a 529 plan for one child, such as parents, grandparents, uncles and aunts, who controls the assets in the plan?
Each account has an owner-or joint owners-and that person controls the assets, regardless of how many people contribute. The owner doesn't have to be a parent.
Move to a new plan
I read about Kiplinger's favorite 529 plans, and several look much better (and les expensive) than the plan I'm investing in now. Can I switch without a penalty?
New rules makes it much easier to shift from one state's plan to another. In the past, this was allowed only when changing the beneficiary of the account. Now you can move money as often as once a year for any reason.
Contact the plan you'd like to switch into to get the forms you'll need to make the transfer. Because many states continue to improve their plans, it's smart to check out the options every year or so.
Learn Canadian
Can college savings in a 529 or a Coverdell education savings account be used for tuition expenses at a Canadian university?
You can use the money at 771 foreign colleges, including the University of Toronto, McGill in Montreal and many other Canadian schools. If U.S. students at the school qualify for federal financial aid, you can use 529plan or ESA money to pay the bills without worrying that you'll lose any of the tax benefits.
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