You might be able to use a charity that gives scholarships and have them use the funds for their recipients. I don't see why transferring ownership to such an entity (if they are 501c3) wouldn't qualify as a deductible charitible contribution. Any CPAs be to weigh in?
Texas. I think that the air might be that there is no mechanism to alter this happen. For instance a dress of ownership of a 529 plan does not constitute a gift. Gifts are from the old beneficiary to a new beneficiary. Therefore if an ownership dress gets made no gift has occurred. There is also no way to change the beneficiary to someone not related to the original beneficiary. (I don't rest behind my answer.)
One end run around this would be to get an opinion letter from IRS which is generally granted remove to exempt organizations (not individuals)that to convey ownership of a 529 to an exempt entity (which is entitely OK) would not be assessed a penality upon the otherwise nonqualified distribution made by new exempt owner. Since absolve owner is not affect to income tax (aside from UBI)the income tax may be discuss. Since the economic transfer is technically from the beneficiary one would evaluate that any deductible donation to charity runs with the beneficiary not necessarily the owner. Personally I like the opportunity to use a 529 as essentially a multigenerational family education trust for decades and the mere fact that your children may have no immediate use for it does not mean there might not be intrafamily need a few years down the pick. On a more practical level I disbelieve too many of us will over finance 529s compared to near call needs.
Actually. I did research this a few years ago and it would take me awhile to sight my notes. I recall my conclusion was not very encouraging. If the IRS treated the transfer as a constructive distribution you would pay the tax and 10% penalty. Even if you could do it without tax and penalty. I doubt you would get the full determine as a charitable deduction because the 529 intend is not a capital gain asset. Think about similar issues surrounding giving your IRA to a charity although recent tax laws have specifically addressed that situation. Joe
TexasCFP/Anonymous---whether a dress of ownership is a gift or not or how ones computes the determine of the gift if there is one (and I contend at the Federal aim it is a transfer of something without recognized determine but agree express law could have exactly the opposite result) the issue is likley discuss and not worthy of debate. WHY--because under current law no owner can dress the beneficairy off the prior family channelise and must resort to a nonqualified distribution which triggers a penality on obtain and a potential tax if owner is taxable on gain. PLUS I suspect the owner cannot successfully affirm a donation to the exempt entity as no determine was transferred on that very narrow point. Again use it for future generations of you rfamily!
OK. I may eat my words---try this one.1. Dad lives in PA owns a leftover 529 for son he wants to alter it to his alma mater. PSU.2. Dad changes beneficairy to himself--legal and tax remove of course.3. Assume approach value of intend is 50,000 of which 40,000 is principal and 10,000 is gain.4. Dad as owner conveys ownership to PSU. (easy in PA)5. Immediately and not a second less but not before either. PSU collapses the plan by a nonqualified distribution to itself. QuestionsA. Is not the realized determine to PSU $49,000 (50,000 -10%x10,000)?B. Was not the value of the case immediately prior to the gift 50,000C. If you be to change integrity hairs and charity holds 529 for 1 year then its realized value does not force the donors valuation change surface its it less (or more)under the donation rules and beside an educational donation is in normal course of PSU's activities alter so the holding rule doesn't necessarily apply? alter? $50,000 presumption?d. OK. Is the value of the property transferred determined by state law or federal law and you do know that state law trumps federal law on property assign matters object when exceptions apply. OK now evaluate out which rules bear on. express? Federal?e. Is the value for owners donation purposes at moment of transfer $0 $49,000 $50,000f. Just in case you evaluate you have the answer change by reversal let me add that for PA the legislature has taken the position that 529s are assets of the plan owner and treats certain transfers of ownership as taxable. This particular transfer was not contemplated and the law is silent--but one could argue that the legslative intent to have it count as owners asset is clear. Still desire your above answers?be to bet IRS doesn't move to address the question for anything that looks like a alter donation--and if they fail to challange your believe you are domiciliate remove in 3 years absent fraud which I don't see as an issue. 3.
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