A 529 Plan (also referred to as a Qualified Tuition Program) is an investment account established pursuant to Section 529 of the Internal Revenue Code (IRC) as well as state law. It is a popular way for a family to save for college or other postsecondary education, while also serving as an estate planning technique. Although there are many positive aspects of a 529 Plan, there are also limitations and uncertainties that should be considered before investing in, distributing or rolling over a 529 Plan.
Owner and Beneficiary
Any person (not just a family member) can create or contribute to a 529 Plan for a named beneficiary, although the account is generally opened and funded by a parent or grandparent. The owner and contributor need not be the same person. Moreover, the IRC defines a “person” as including a trust, estate, partnership or corporation. To avoid certain abuses, the IRS has proposed regulations limiting an owner to an individual. Notwithstanding the broad definition of owner, a beneficiary must be a natural person.
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