529 plans have long been recognized as a reliable means of saving for higher education expenses. However, recent developments have expanded their horizons to extend beyond their original purpose. From alternative beneficiaries and diverse educational expenses to innovative investment options, 529 plans offer versatile possibilities.

With the passing of the SECURE 2.0 legislation, starting in 2024 beneficiaries of 529 accounts will have the option to rollover a maximum of $35,000 over their lifetime to their Roth IRA, if they meet additional criteria.

Key Considerations for 529 Plan Rollovers:

Minimum 15-year duration. The 529 plan must have been open for at least 15 years to be eligible for rollovers.
Beneficiary ownership. The owner of the Roth IRA must also be the beneficiary of the 529 plan.
Income requirement. The rollover is contingent upon the Roth IRA owner having income equal to or exceeding the rollover amount.
Exclusion of recent contributions. Contributions made within the past five years, including associated earnings, are ineligible for tax-free transfers.
Roth IRA contribution limits. Rollovers from a 529 plan to a Roth IRA count against the annual contribution caps of the Roth IRA.

If the Roth IRA Rollover is not an option, a 529 plan can still offer several interesting options and benefits. Here are some possibilities to consider:

Change Beneficiary. If the original beneficiary of the 529 plan decides not to pursue higher education or doesn’t require the funds, you can change the beneficiary to another qualified family member. This flexibility allows you to support another loved one’s educational pursuits.
Future Educational Expenses. Even if the original beneficiary has completed their education, the funds in a 529 plan can be saved for future educational expenses. This includes graduate school, vocational training, or professional development courses. The tax-advantaged growth of the funds can continue until they are needed.
Lifetime learning credits. The funds in a 529 plan can be used to cover eligible expenses for lifetime learning credits. These credits can be claimed on your tax return to offset the costs of continuing education for yourself or your qualified dependents.
Transfer to another state’s plan. In some cases, you may find that another state’s 529 plan offers more attractive investment options or lower fees. You can explore the possibility of transferring your 529 plan funds to another state’s plan, taking advantage of potential benefits and optimizing your savings.
Keep for future generations. If you have young children or anticipate having children in the future, you can keep the 529 plan intact and allow the funds to grow over time. This ensures that you have a dedicated education fund available when the next generation is ready to pursue higher education.
Estate planning. A 529 plan can be incorporated into your estate planning strategy. You can establish a trust to ensure that the funds are utilized for educational purposes in the future. Contributions to a 529 plan can be considered completed gifts for estate tax purposes. By transferring assets into a 529 plan, you may potentially reduce the size of your taxable estate.

Remember to review the specific rules and regulations governing your 529 plan and consult with a financial advisor, tax professional, or estate planning attorney to explore the best options for your specific circumstances. Beverly Hills Private Wealth can provide comprehensive advice tailored to your financial goals and help you make the most of your 529 plan funds. Contact BHPW to learn how we can help you.

Beverly Hills Private Wealth, LLC is a registered investment adviser. This is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Beverly Hills Private Wealth, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Beverly Hills Private Wealth, LLC unless a client service agreement is in place.

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