Expansion of 529 Plan Uses. The Act also made two small but helpful changes to the rules governing education savings accounts set up under Internal Revenue Code Section 529 (“529 plans”). The first allows up to $10,000 in a 529 plan to be distributed (tax-free) to the account’s designated beneficiary, or his or her sibling(s), to pay principal or interest on qualified education loans. Notably, the $10,000 limit is per beneficiary/recipient, which means that it is available for a beneficiary only once, regardless of the number of 529 plans of which he or she may be a beneficiary. The other useful change is that 529 plans may now be utilized to pay qualified expenses related to registered apprenticeships, a category of educational program that was previously excluded.
What should you do to address these changes for your personal planning?
• Analyze and potentially reexamine your designated beneficiaries.
• Discuss with your financial advisor and accountant to verify when and whether you should take necessary minimum distributions, specifically if you turn age 70½ in 2020 or later. (For example, a delay may ensue higher RMDs and raise taxes and Medicare premiums.)
• Analyze your estate plan with an attorney and potentially make adjustments required by the Act.
Katie Von Kohorn is a partner at Casner & Edwards specializing in trusts and estates and exempt organizations, focusing on estate planning, estate and trust administration, charitable giving and advising exempt organizations.