college plan to a gift

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college plan to a gift

Post by drjurman » Wed Sep 03, 2014 7:49 pm

My parents set up college plans for my sons. One went to school RIT, and the other decided he wanted to work.
The working son is getting married next month, how can he, or can he take his unused college money as a tax free gift?
He and his fiancee want to establish a back stop against the lousy manufacturing economy in CT.
My business that he is employed in is struggling and is tapped out financially.

Any answers?

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Re: college plan to a gift

Post by livesoft » Wed Sep 03, 2014 8:06 pm

What kind of college plan are you writing about? Can you be very specific in describing it, name, custodian, etc? That will help me think of an answer and maybe others, too.
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Re: college plan to a gift

Post by drjurman » Wed Sep 03, 2014 9:02 pm

It's a Merrill Lynch nextgen fund. I'll dig out the papers tomorrow

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Re: college plan to a gift

Post by dickenjb » Thu Sep 04, 2014 5:58 am

Need to know if it is a 529, UGMA, etc.

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Re: college plan to a gift

Post by secondcor521 » Wed Sep 10, 2014 4:15 pm

The Merrill Lynch NextGen account appears to be a 529 plan. According to their FAQ located at, "What if my beneficiary does not choose to attend college?", they write:

Section 529 plans, including the NextGen Plan, have built-in flexibility that always leave you in control and gives you options. In the event your beneficiary does not choose college, you can:

Leave it invested! The assets can stay in the account where they can continue to have the opportunity to grow tax deferred. If your beneficiary decides to attend college in the future, the funds can be withdrawn federal (and possibly state) income tax-free for qualifying higher education costs.1 There is currently no time limit on when funds must be withdrawn.
Change the beneficiary to a qualifying family member of the current beneficiary with no immediate tax consequence.3 You could change the beneficiary in the account to a sibling, for instance, to pay for that child’s qualifying college costs. You could even change the beneficiary to yourself and pursue your own higher education! Keep in mind that if you change the beneficiary to anyone other than a qualified family member of the current beneficiary, the change could be treated as a non-qualified withdrawal and the earnings portion of the transferred amount will be subject to income tax and a 10% additional tax.
Take the money back. Keep in mind, if you take a non-qualified withdrawal, any earnings will be subject to ordinary income tax and an additional 10% tax, and may also be subject to state and local income taxes. The additional 10% tax does not apply under the following
–– If the beneficiary receives a scholarship, you can withdraw up to the amount of the scholarship from your account.
–– If the beneficiary becomes disabled.
–– If the beneficiary dies and the withdrawal is paid to the beneficiary’s estate.

The last paragraph or so is probably what the OP wanted to know.

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