How to Fund Your Adult Education

So you’ve probably heard plenty about using 529 plans to save for your kids’ college costs, but what about you? If your desired career change requires a return to school, you can open and fund a 529 to get a tax break when paying for your own “qualified education expenses at an eligible educational institution.” (Click here for important details on what that IRS-speak means.)

Not 100% certain you’ll go back to school? That’s where the ability to change the 529 plan beneficiary comes in handy.  If you fund a 529 and then end up not needing some or all of it, you can switch the beneficiary to one of your kids or another qualified family member (see IRS definition) without income tax consequences.

Conversely, as suggested by the definition of “qualified family member,” if your child is the beneficiary of a 529 plan containing assets he or she won’t use, you could change the beneficiary of that plan to yourself and use it toward your own education.    But why wait?

College planning expert Todd Weaver of Strategies for College, Inc., points out that there may even be instances where you would want to use your child’s 529 plan for your education, even before he hits college and starts using it.  One example would be a case where a return to school puts the parent in a position to change to a career with significantly higher salary, thereby making the kid’s college bills — by the time they are due — much more manageable.

(Caution!  While there are no income tax implications associated with a qualified 529 beneficiary change, such a change could trigger gift tax implications, if the amount transferred is high enough.  This article explains how that works. Note that, since the article was written in 2005, the annual gift tax exclusion has gone from $11,000 to $13,000 in 2009.)

About the author

Sherrill St. Germain, CFP®

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Copyright 2014   About Us   Contact Us   Our Advisors       Login