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@karaG - sorry, 1 more thing - 10K is not that much? so OK to take out of 529? There's still lots to compound? Or OK, they can take it out of the bank account?
I just called my 529 company. changing ownership (to anyone, even not a relative) is just a form... and not taxable event?
And changing beneficiary (a relative) is just a form also, and not a taxable event when it's changed to a relative.
The 10K can be used for 'qualified' student loan (I gave the scenario of a company makes a general loan for the student who uses it for school.. And then you pay that off with 529 money and IRS disallows it).
Seems the 'all the paperwork' argument that it's not worth it moot.
Back to the - would you pay the $10K from savings account or from 529 when the 529 has much more and won't be needed for years - question.
@leastprime - what's quack an acronym for? I looked, couldn't find : )
@karag - ARGGG another angle..... is a 529 considered an asset of the owner or beneficiary / is it at risk in divorce of owner? or of beneficiary?
Although, at least here in NJ (and most states?) money you came into the marriage with typically isn't commuinity assets / anything that can get drawn into a divorce settlement?
Yeah, then why a prenup? If you keep pre-marriage assets separate, they aren't marrital property.
One) if the file 29 plan has $700,000 in it, it sounds to me like you have done all right… And the daughter and son-in-law have done all right… So I don’t know why they’re asking you for the 10,000 anyway Could she be a little spoiled if she has the money or they’re doing all right? Why are they asking you for it?
Two) given that you have done all right and there’s $700,000 in the account if you can’t give them money out of that account without some big hassle, just find $10,000 to give them that’s not even Half of what you could give them in terms of gifts for the year and save the 529 plan for the grandkids…
I don’t get all the agita over $10,000 when you all apparently have way more than that anyway
just my take on it
You would not be giving them $10,000. You would be giving the entire thing to your daughter and after that she can do as she wishes with the money and more than likely, her husband can do as he wishes with the money because she will do as he says, if only to keep peace in the family.
I suggest you save it for the grandkids.
He has 5 college degrees, he can surely pay off a $10,000 student loan?
You never know what the future will bring. Maybe your daughter will decide to go back to school after her kids are old enough.
There is no guarantee in this life that there will not be a divorce, so that possibility should be figured in.
Seems to me that the easiest course of action would be to liquidate the 529, pay the tax penalty, and put the rest of it into some sort of interest-bearing account for your own benefit. Out of the remaining amount of money, feel free to give $10,000 or whatever amount you wish to your daughter. I wouldn't worry about funding a 529 for the grandkids. It would be easier to let your daughter set up accounts for them and then you can deposit money into those accounts as you wish.
What's the deal with your son-in-law's family? Is he an orphan? Why don't his parents pay off his $10K loan? His loan is on them first, not you. Especially also since your daughter and he are comfortable financially. If they ask again, just say no and tell her to stop asking. Think of your grandkids instead and stick with your original plan.
A 529 is an asset of the owner and beneficiaries can be changed, on a whim, by the owner. Unless you are tired of managing the account, I would not transfer ownership to your daughter.
Thank you all again! I'm always intrigued by what others think vs. my thinking (an inferiority complex? Seeking confirmation that my thinking isn't all that skewed?).
Interesting answers.
I spoke to my son with 2 degrees and CPA. He says, as I was thinking, that on a numbers basis, paying from a taxable account makes the most sense. Let the tax exempt money grow.
Reminded me of years ago with a small IRA, brokers would charge a $25 - $50 annual maintenance fee. They gave you the option to pay out of a checking account or they could deduct it from IRA. Conventional wisdom was to pay from the checking account - keep as much of the money tax free / tax deferred.
As for them asking.... it's more family psychology - me saying I didn't think it makes sense, but check with others. and then they don't. and then when they ask again a year later, I don't say 'we did this already... i don't think it makes sense, but it's your money. check with someone else.
And as much as he has 5 degrees, she has 2 and they are both gainfully employed.... I think they hear that a new law lets you pay off student loans (up to $10K lifetime limit) with unused 529. So they think that makes the most sense as to how to pay off his loan. The intent of the law (I think) is to let you use up the money in the 529. But that's not the case for them. And I didn't think of that angle to explain it to them.
And it's dealing with money that will sit for 20+ years and grow, so as people have said, taking $10K out of this account is not much.
As for the SIL's family? he has 2 siblings. He is the most stable / settled / financially secure of the 3. He can certainly pay it off himself (interesting angle to look to his parents for the money... I didn't think of that at all! He IS married with a kid. I think he's off the family payroll - we joke about that for our kids. Side note, as my father did for me and my siblings, we paid for our son's and daughter's college / they have no student loans. Got some merit money but no student aid. At times I think that having loans builds more responsibility?).
I really think this is all based on them hearing of the new law and he / they have the student loan, so lets take advantage of the law? Again, it's not that they need the $10K. They are very conscientious about money and both are gainfully employed. They got rid of their private mortgage insurance by paying extra on their mortgage from soon after covid started (low interest rate), and home appreciation in general, then requested the PMI be cancelled.
@karaG - sorry, 1 more thing - 10K is not that much? so OK to take out of 529? There's still lots to compound? Or OK, they can take it out of the bank account?
$10K is not that much for them to pay out of their own accounts. You said they're doing well. Let them learn how to finish paying off their own debt responsibly.
I'm just not a fan of giving adult children (and especially son in laws) chunks of cash. You're not his parent, they really shouldn't have asked you.
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