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One of the great advantages of a tax-free 529 college savings plan is that anyone can open an account - whether it’s the child’s parents, grandparents, aunt and uncles, close family friends, or even a trust. A trust is a legal relationship in which assets are held by a fiduciary for the benefit of another person, the beneficiary. When a trust opens and manages a 529 plan, it can be used for the future payments of the beneficiary’s qualified higher education expenses.
Big tax benefits of Ohio’s 529 Plan
A trust may want to consider using Ohio’s 529 Plan for the beneficiary’s college costs. Ohio’s 529 Plan allows your college savings to grow in a tax-advantaged manner.
All earnings, including interest, grow tax-free. This means that all of the earned income is yours to use to cover qualified college costs without negative tax consequences.
All 529 plan withdrawals are tax-free when used qualified higher education expenses, which are those required costs for attendance at a school.
“Save here, go anywhere” with Ohio’s 529 Plan
Just because you saved in Ohio’s 529 Plan doesn’t mean the trust’s beneficiary has to attend an Ohio college or university. Your 529 college savings plan can be used nationwide at any post-secondary educational institution, including four-year colleges or universities, two-year community colleges, trade or vocational schools, apprenticeships, and certificate programs, or graduate schools. If the school has a Federal School Code on the Free Application for Federal Student Aid (FAFSA), then the withdrawals to cover qualified higher education expenses at that school will be tax-free.
How to set up a trust account with Ohio’s 529 Plan
To open a trust 529 with Ohio 529 Plan, CollegeAdvantage, there is a specific paper form to complete and mail to the address within the form. Some key pieces of information you will need when you begin to fill out the trust form are:
- Taxpayer Identification Number for the trust;
- Social Security Number for the trustee, beneficiary, and successor trustee;
- Date of birth of beneficiary;
- How the trust would like to make the initial investment; and
- Copies of the first and last pages of the trust
There are different sections on the form for trust information, then the trustee — who will be the only individual permitted to direct or authorize account transactions — and trustee identity verification information; and beneficiary information. The next area is for the Successor Trustee information and is an optional area to fill out. However, it would be wise to consider selecting a Successor trustee, who will take control the 529 account in case the original trustee dies or is found legally incompetent. A Successor Trustee can immediately step in and continue with the original plans for the trust 529. To learn more about a successor trustee, this article shows why it’s important to identify a successor in case the worse happens. A successor trustee can be revoke or changed at any time. The successor trustee named on the CollegeAdvantage account, must also be listed as a trustee on the Trust paperwork provided with the Trust Application.
After the successor trustee section, the trust will select the investment option in which to place the college savings. For more conservative options, Ohio’s 529 Plan offers 529 Savings Accounts or 529 CDs through Fifth Third. The next step will to be to set up the contribution method. An initial contribution to an Ohio 529 account starts at $25, unless a CD is selected for which a $500 minimum contribution is required.
Once the trust has filled in all the information, the trustee must sign the forms and mail them to the address listed on the forms. Additionally, the first and last pages of the trust – sometimes called the “execution pages” – minimally containing the name of the trust, the date of the trust, and the signature(s) of the trustee(s) – must be included with the trust application. Without these pages from the trust, the application will be incomplete.
For over 30 years, Ohio’s 529 Plan, CollegeAdvantage, has been helping families across the nation save for their children’s higher education. Ohio’s 529 Plan covers qualified costs at any four-year college or university, two-year community college, trade or vocational school, apprenticeship approved by the U.S. Labor Department, or certificate program nationwide that accepts federal financial aid. If you’d like to learn more about the tax-advantaged way to save for college, explore Ohio’s 529 Plan — The Plan That Can.
Posted on April 22, 2021