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New Changes to 529 Plans

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By Amanda L. Richter, CPA

The Tax Cuts and Jobs Act (TCJA) has made some significant changes to qualified tuition programs also commonly known as “529 plans”. These plans are a tax-advantaged savings plan designed to encourage savings for future education costs. 529 plans are authorized by Section 529 of the Internal Revenue Code “IRC” and are sponsored by states, state agencies, or educational institutions.

Distributions from 529 plans are tax-free if it is used to pay “qualified higher education expenses” of the beneficiary (student). Under old law, tuition for elementary or secondary schools was not considered a “qualified higher education expense”. So students (529 beneficiaries) who had to pay tuition for elementary or secondary schools could not receive tax-free distributions from their 529 plans.

Now under the TCJA, the law provides greater flexibility for families by expanding qualified higher education expenses to also include expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school. And as a result, tax-free distributions from 529 plans can now be received by beneficiaries who pay these expenses, effective for distributions from 529 plans after 2017. Also, 529 plans can be transferred between relatives, allowing significant amount of flexibility for families with overfunded 529 plans.

Under subsection (b)(1)(A)(ii), there is a limit to how much of a distribution can be taken from a 529 plan for these expenses. The amount of cash distributions from all 529 plans per single beneficiary during any tax year can’t, when combined, include more than $10,000 for elementary school and secondary school tuition incurred during the tax year. Any excess distributions received by the beneficiary would be treated as a distribution subject to tax under the general rules of section 529 of the IRC.

Kit KatAsk Kit Kat – Koko Passes

Hook Law Center: Kit Kat, who was KoKo, and has she now died?

Kit Kat: Koko was a beloved gorilla who was a pioneer in communicating with humans using sign language. She was age 46, and she lived her last years at The Gorilla Foundation’s preserve in Northern California. She died in her sleep the week of June 18, but it was first reported in The Washington Post on June 21, 2018.

Koko was a very social creature, and her two loves were baby dolls and kittens. During her lifetime, she had several cats—All Ball, Lips Lipstick, Smoky, Ms. Gray, and Ms. Black. She tended to them and stroked them, like any human owner would. They were pure delight for her! She appeared on the cover of  National Geographic twice. In one of the articles, Koko was featured with her kitten, All Ball. That led to a book called Koko’s Kitten, which is still a part of many elementary school curriculums today.  Koko also had relationships with several celebrities including Mister Rogers, Betty White, and Robin Williams.

Koko was born in captivity at the San Francisco Zoo on July 4, 1971. She was a western lowland gorilla. Her official name was Hanabi-ko, which means “fireworks child” in Japanese. It soon was shortened to Koko. At the zoo, she started working with Francine “Penny” Patterson, who was a young animal psychologist. It was she who introduced Koko to an adapted version of American Sign Language, which she soon dubbed “Gorilla Sign Language,” or GSL. There is some debate about whether or not Koko was really internalizing language or merely mimicking Dr. Patterson’s movements, with whom Koko had developed a close relationship. Nevertheless, the foundation issued a statement after Koko’s death about the importance of her life—“Her impact has been profound and what she has taught us about the emotional capacity of gorillas and their cognitive abilities will continue to shape the world.” (Lindsey Bever, “Koko, the beloved gorilla that learned to communicate using sign language, has died,” The Washington Post (Animalia section), June 21, 2018)

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Posted on Monday, July 2nd, 2018. Filed under Senior Law News.
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