“I would love to be able to donate [my 529 plan] to my alma mater, or to a scholarship-granting charity, so that it can be used to help send someone else’s child or grandchild to college, but in doing so I should not have to pay tax and penalty.
Pittsford, NY (PRWEB) January 30, 2012
A rule change that would allow parents and grandparents to donate their “leftover” 529 plans to schools and other charitable organizations has become the top 2012 legislative goal for Savingforcollege.com, the leading independent resource and authority on Section 529 college-savings plans.
The federal tax laws do not specifically provide for charitable donations of 529-plan accounts, and the rules that restrict beneficiary changes to other family members make it highly unlikely the IRS would approve transfers to a charitable organization. Currently, charities can establish their own 529 plans for scholarship purposes.
A parent or grandparent who establishes a 529 account and ends up with more money in it than the beneficiary needs for college expenses generally has only one option for using that account without paying tax and 10% penalty on the account earnings: changing the beneficiary to another family member for the new beneficiary's college expenses.
“We’ve just paid our own family’s last college tuition bill, yet I still have some money remaining in our 529 plans,” says Joe Hurley, founder of Savingforcollege.com and CEO of parent company JFH Innovative LLC. “I would love to be able to donate this money to my alma mater, or to a scholarship-granting charity, so that it can be used to help send someone else’s child or grandchild to college, but in doing so I should not have to pay tax and penalty.”
Hurley believes that allowing for charitable donations of unspent 529 plans will not only assist thousands of young students across the United States who may otherwise not be able to afford college, but will also spur additional contributions to 529 plans. The reason cited most often for staying clear of 529 plans for college savings is the tax and penalty risk..
"That risk is reduced when a potential contributor knows that a future donation of the account is a possibility," he says. Savingforcollege.com also supports proposals that would allow 529 account owners to roll over their 529 funds to their own individual retirement accounts (IRAs), subject to the income requirements and annual dollar limitations currently attached to IRAs.
As part of its efforts to advance these ideas, along with other improvements to 529 plans, Savingforcollege.com has become a member of the College Savings Foundation (CSF), a Washington D.C.-based not-for-profit organization. CSF’s mission is to help American families achieve their education savings goals by working with public policy makers, media representatives and financial services industry executives in support of education savings programs. Hurley has been invited to present at CSF’s annual 529 conference on March 8, 2012 in Charleston, South Carolina.