Can I transfer custodial account funds to a 529 plan?
Most 529 plans allow such a transfer, but there are a few special rules. Money you put into the kids’ custodial accounts was an irrevocable gift, and moving it to a 529 account doesn’t change that fact. The money can never be shifted to another beneficiary, for example, and your children will control it when they reach the age of majority, either 18 or 21, depending on state law. New money put into a separate account in the same 529 plan still can be controlled by the parents and shifted to another beneficiary if the child for whom the account is intended decides not to go to college. The distinction between custodial-account money shifted to a 529 plan and other contributions is a good reason to separate accounts. College-savings plans accept only cash deposits, so you’ll have to sell the stock, mutual funds or other investments from the custodial account — and pay capital-gains taxes on any profits — to shift the money.
Most 529 plans allow such a transfer, but there a re a few special rules. Money you put into the kids’ custodial accounts was an irrevocable gift, and moving it to a 529 account does n’t change that fact. The money can never be shifted to another beneficiary, for example, and your children will control it when the y reach the age of majority, either 18 or 21, depending on state law. New money put into a separate account in the same 529 plan sti ll can be controlled by the parents and shifted to another beneficiary if the child for whom the account is intended decides not to go to college. The distinction between custodial-account money shifted to a 529 plan and other contributions is a good reason to separate accounts. College-savings plans accept only cash deposits, so you’ll have to sell the stock, mutual funds or other inves tments from the custodial account — and pay capital-gains taxes on any profits — to shift the money.
Most 529 plans allow such a transfer, but there are a few special rules. Money you put into the kids’ custodial accounts was an irrevocable gift, and moving it to a 529 account doesn’t change that fact. The money can never be shifted to another beneficiary, for example, and your children will control it when they reach the age of majority, either 18 or 21, depending on state law. New money put into a separate account in the same 529 plan still can be controlled by the parents and shifted to another beneficiary if the child for whom the account is intended decides not to go to college. The distinction between custodial-account money shifted to a 529 plan and other contributions is a good reason to separate accounts. College-savings plans accept only cash deposits, so you’ll have to sell the stock, mutual funds or other investments from the custodial account — and pay capital-gains taxes on any profits — to shift the money.
