My brother's baby girl is turning 1 in August and instead of getting her some more clothes or toys that she'll use for like 15 minutes, I'm thinking of starting an account for her to enjoy when she turns 18. Whether it just be extra spending cash she can have when she's going into college or money she can use for tuition, I just feel like getting a few thousand dollars then would be more useful than any gifts I can get her now.
With that said, I know very little about 529 plans or opening any type of account for a minor that would be gifted later in life. Any suggestions on how to go about this? Is a 529 my best option? Are there any tax considerations I need to take into account?
Any insights would be appreciated. Thanks!
There's always tax implications.
You may be able to take a tax deduction against your state income tax if you buy the in-state plan. More important, be sure to check out costs of whatever plan you choose. You can buy any state's plan.
At 3, she can deliver drinks to her fathers friends while they host Giant's viewing parties. Problem solved.
Seriously though, I believe the 529 can focus on tuition for college and is a win-win if planning to attend college in the state they live in.
It's probably best to write them a check for her 529.
that way that money can be aggregated with their other 529 plan
otherwise, what are you going to give her? $100? $500? at that amount you're almost better off buying a savings bond.
Setting up the account is easy send them to the link below (if they want to use the NY plan)
Link - ( New Window )
It's probably best to write them a check for her 529.
that way that money can be aggregated with their other 529 plan
otherwise, what are you going to give her? $100? $500? at that amount you're almost better off buying a savings bond.
A lot of 529s allow you to add relatives as contributors so you can just deposit the money directly in the account (cuts out the middle-man).
I live in NY, my brother lives in Maryland. So would she have to go to school in the state where the 529 is set up?
Also what happens in the event that she doesn't go to college, or gets a full scholarship? Is there any recourse on these plans?
I live in NY, my brother lives in Maryland. So would she have to go to school in the state where the 529 is set up?
Also what happens in the event that she doesn't go to college, or gets a full scholarship? Is there any recourse on these plans?
She could go to any school, you're not limited to ones in the state with the 529. IIRC, you only get tax benefits if you set up the 529 in the state that you live in.
If she doesn't go to college, there are penalties on withdrawing the money similar to withdrawing from a 401k pre-retirement age. If she gets a full scholarship (assuming this only covers tuition), she can still use the 529 for things like housing, books, meal plan, etc. Basically any expense related to attending college.
She'll probably appreciate it more if you just put those deposits towards a low cost mutual fund. Just open an account with Fidelity/Vanguard and make contributions whenever you please. This should perform the same as a 529 (which is simply a mutual fund(s)) but doesn't have any strings attached (i.e. she can buy a car with it, travel the world, etc)
She is lucky to have you as an uncle
n comment 12347892 giants#1 said:
Quote:
I figure between birthdays and presents for 18 years, I'll end up depositing between 4-5k. They do have a 529 already set up for her, but I thought it'd be nice if I did something on my own to give to her when she's older. If it's really inconvenient this way, I could just send my brother money to deposit himself.
I live in NY, my brother lives in Maryland. So would she have to go to school in the state where the 529 is set up?
Also what happens in the event that she doesn't go to college, or gets a full scholarship? Is there any recourse on these plans?
She could go to any school, you're not limited to ones in the state with the 529. IIRC, you only get tax benefits if you set up the 529 in the state that you live in.
If she doesn't go to college, there are penalties on withdrawing the money similar to withdrawing from a 401k pre-retirement age. If she gets a full scholarship (assuming this only covers tuition), she can still use the 529 for things like housing, books, meal plan, etc. Basically any expense related to attending college.
She'll probably appreciate it more if you just put those deposits towards a low cost mutual fund. Just open an account with Fidelity/Vanguard and make contributions whenever you please. This should perform the same as a 529 (which is simply a mutual fund(s)) but doesn't have any strings attached (i.e. she can buy a car with it, travel the world, etc)
i also believe I read a rule that it doesn't even need to be used for education for the beneficiary. Let's say this kid gets a full ride to school, it can be used for another child or even a adult for education without penalty.
Even nieces, nephews, grandchildren etc...
She is lucky to have you as an uncle
n comment 12347892 giants#1 said:
Quote:
In comment 12347878 knicks3031 said:
Quote:
I figure between birthdays and presents for 18 years, I'll end up depositing between 4-5k. They do have a 529 already set up for her, but I thought it'd be nice if I did something on my own to give to her when she's older. If it's really inconvenient this way, I could just send my brother money to deposit himself.
I live in NY, my brother lives in Maryland. So would she have to go to school in the state where the 529 is set up?
Also what happens in the event that she doesn't go to college, or gets a full scholarship? Is there any recourse on these plans?
She could go to any school, you're not limited to ones in the state with the 529. IIRC, you only get tax benefits if you set up the 529 in the state that you live in.
If she doesn't go to college, there are penalties on withdrawing the money similar to withdrawing from a 401k pre-retirement age. If she gets a full scholarship (assuming this only covers tuition), she can still use the 529 for things like housing, books, meal plan, etc. Basically any expense related to attending college.
She'll probably appreciate it more if you just put those deposits towards a low cost mutual fund. Just open an account with Fidelity/Vanguard and make contributions whenever you please. This should perform the same as a 529 (which is simply a mutual fund(s)) but doesn't have any strings attached (i.e. she can buy a car with it, travel the world, etc)
Thanks!
If for some reason your niece isn't worthy of collecting[drugs, improper behavior etc.]. You still will have access to the fund. Which you can use for other family members education or you can withdraw at you current tax rate.
The above is informational, and I wish nothing but success for her.