Whereas Code Section 529, as originally enacted, excluded QTP
contributions from gift tax and GST tax treatment as Code Section 2503(e) qualified transfers for educational expenses, in 1998, the statute was amended to provide that contributions do not constitute Cede Section 2503(e) qualified transfers, but rather, constitute completed gifts of present interests qualifying for the annual exclusion from gift tax and exclusion from generation-skipping transfer tax.
section] 529 (the QTP
, discussed supra note 11); id.
In general, the impact of these plans on financial aid eligibility is dependent on two factors-the type of QTP
and the identity of the account owner.
distributions may be used to pay QEE from any Eligible Educational Institution regardless of which state the account owners or beneficiary resides in or attends school.
If a beneficiary receives taxable distributions from both a QTP
and a Coverdell Education Savings Account (ESA) in the same year, as discussed below, the postsecondary expenses must be allocated between the distributions.
When considering which QTP
to use, consider the fees.
Further, the IRS announced that for 2009 only, a participant in a QTP
can change the investment strategy selected for the account twice--instead of once--without violating Sec.
Thus, employers may wish to fund QTPs
as fringe benefits for employees.
Transfer of credits from one QTP
for the benefit of a designated beneficiary to another program will not be deemed a distribution.
Qualified educational expenses for purposes of the QTP
and ESA include tuition and related expenses, books, supplies, and equipment required for enrollment--a broader definition than that used for the HSC, LLC, or HEED.
A beneficiary can withdraw from both a QTP
and an ESA as long as the total withdrawn does not exceed the QEEs incurred that year.
Benefits may now be rolled over from one QTP
to another for the same beneficiary, but only once within a 12-month period.