529 plan questions

[Hilltopmom]

Let me start by saying, my MIL set up ds's 529 & probably won't let us access the funds (because she's like that).

I had not realized that the donor who set it up can take the $ back whenever they want. That's too bad.

 

Anyways, if we can get to the $-

 

I just read that 529 plans can be used to pay for computer equipment, wish I'd known that before buying ds's laptop this month.

Can they be used to pay for part time classes, like DE? We pay out of pocket 100% for DE, so it'd be nice if we can when next year he's doing all DE but not eligible for financial aide since he's non matriculated.

 

You have to go through the person who set it up to get the $ though, correct, ds can't acces it himself to pay tuition?

[Crimson Wife]

I don't know if a 529 can be used to pay for classes for a student in non-degree status. But I do know that the student has to be enrolled at least half-time in order for the 529 distributions to be tax-free. I'm using a 529 to pay for my 2nd bachelor's and need to take at least 6 credits per semester because 12 credits is considered FT.

[JanetC]

No, the 529 cannot be used for classes or computers for a high school student.

[Lori D.]

Here's the IRS info on the 529. According to this info, only your MIL can access/control the 529 funds if she is the purchaser / custodian of the account, so you or your spouse are not legally able to access the account directly, regardless of MIL's wishes to allow/disallow your access.

 

Here is recent (Jan. 2016) info about using 529 funds for computers. 

 

Yes, 529 funds can pay for qualified expenses for a dual-enrolled high school student, as the IRS does not stipulate age or graduation status for using the funds for college expenses. Check out this January 2015 article: "Your 529 Questions Answered".

 

One thing you did not mention that you might want to look in to is you & DH deducting DS's qualified educational expenses from his DE tuition and books from your tax return. Look into:

- the Lifetime Learning Credit (see this brief article from an accounting firm on eligibility)

- OR the American Opportunity Credit (the DE is at an eligible educational institution; AND the student is enrolled in a program leading to a degree or certificate; AND the student carries at least half-time credit load)

 

The links for those credits above are the web versions of IRS publication 970 (pdf booklet format).

 

 

BEST of luck in getting it all sorted out! Warmest regards, Lori D.

[MarkT]

Wait for college to use it (purpose of 529) and even then wait until the last year of college so it does not affect financial aid since it is "outside" money.

[RootAnn]

Let me start by saying, my MIL set up ds's 529 & probably won't let us access the funds (because she's like that).

I had not realized that the donor who set it up can take the $ back whenever they want. That's too bad.

529s are managed by the account owner. They can set the beneficiary to any one they want and change it (at some maximum frequency) to a relative of the original beneficiary. So, we have 529 accounts set up for nieces and nephews, but could change the beneficiary to our own kids, other cousins, the kid's parents, or the kid's children. This makes it easier to use the money that is in there but not used by the original beneficiary. (Say, original child doesn't go to college, dies, or gets grants or scholarships for everything).

 

If you have been putting money into the 529 opened by grandma, it seems fair that you should be able to use it for his education. Legally, however, there is not much you can do to get access. (We put money in an account managed by a now-ex-SIL for one of her kids. No idea what the status of that money is now.)