Liquidating distribution on 1099

(See side quote box for a definition of these custodial accounts designed for holding a minor's assets).But for those that accept them, the IRS deems such a transfer a qualified educational expense.You might wish to move the plan from a high cost plan to a low cost plan; you might move to a state that offers generous tax incentives for contributions to a 529 savings plan and you wish to consolidate your plan holdings in your new state's plan; you might want to exchange from your state's 529 prepaid plan to your state's 529 savings plan or vice-versa; or the beneficiary of your plan may decide not to pursue higher education and you would like to transfer the plan's assets to another beneficiary.More and more 529 savings plans are accommodating direct plan to plan transfers, without liquidating the plan and sending you a check.Uniform Transfers to Minors Act (UTMA) An extension of the Uniform Gifts to Minors Act that allows items other than cash or securities to be considered gifts.

You then transfer the funds in Robert's 529 plan to Nicole's 529 plan.Later, when Nicole has finished her schooling, there remains a balance in the 529 plan.You now shift the beneficial interest over to Miriam, your sister's daughter (your niece and Nicole's cousin).If this recipient person is a minor, the UGMA allows the minor to own the assets without an attorney setting up a special trust fund.Under the UGMA, the ownership of the funds works like it does with any other trust except that the donor must appoint a custodian (the trustee) to look after the account.Rather than withdraw the plan assets and incur income tax on the plan's earnings and a 10% additional tax on non qualified withdrawals, it is often preferable to transfer a 529 plan to another qualifying beneficiary.

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