Education-Related Accounts
Chapters in this video
- 0:00 Clara's $90,000 superfunding problem
- 1:05 529 plans and account owner control
- 1:56 Superfunding: $95,000 and the 5-year election
- 2:43 Qualified expenses and K-12 dollar caps
- 3:33 Non-qualified withdrawal: earnings-only penalty
- 4:02 529-to-Roth rollover rules and beneficiary trap
- 5:01 Coverdell ESA: $2,000 cap and income limits
- 6:27 Coverdell age rules and investment flexibility
- 7:30 Head-to-head comparison table
- 8:08 Rapid-fire exam recap
What this video covers
- How 529 plan superfunding works: the $95,000 lump-sum election, IRS Form 709, and the estate clawback if the donor dies during the 5-year period
- Why the 529 account owner retains full control, not the beneficiary, and how this differs from UGMA/UTMA accounts
- What qualified expenses 529 plans cover, including the $20,000 annual K-12 cap, $10,000 lifetime student-loan limit, and registered apprenticeship programs
- Why non-qualified 529 withdrawals penalize only earnings at 10%, not principal, since principal was after-tax
- How the 529-to-Roth rollover works: 15-year account minimum, 5-year fund seasoning, $35,000 lifetime limit, and why the rollover must land in the beneficiary's Roth IRA (not the owner's)
- Why Coverdell ESAs limit contributions to $2,000 per beneficiary annually across all contributors, with income phaseouts and strict age deadlines (fund before 18, distribute by 30)
- When a Coverdell beats a 529: self-directed investment flexibility in individual stocks, bonds, and specific mutual funds
Read the full lesson, free
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