Why is it important to know who is considered a member of the family in relation to your account with Ohio 529 Plan, CollegeAdvantage? Because it gives you more options with your higher education savings account.
IRS Code Section 529 defines a family member as: a son, daughter, stepson or stepdaughter, or a descendant of any such person; a brother, sister, stepbrother, or stepsister; the father or mother, or an ancestor of either; a stepfather or stepmother; a son or daughter of a brother or sister; a brother or sister of the father or mother; a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law; the spouse of the Beneficiary or the spouse of any individual described above; or a first cousin of the Beneficiary.
Basically, a member of the family can be anyone related to your original Ohio 529 beneficiary by blood, marriage, or adoption.
There are few reasons why it’s good to know who is considered a member of the family.
First, after diligently saving for their education after high school, your child or whoever is your Ohio 529 account beneficiary decides not to attend any school after high school. Keep in mind, the list of eligible institutions includes any four-year college or university, two-year community colleges, trade or vocational schools, apprenticeships, and certificate programs nationwide.
However, you always have options on how to use your Ohio 529 account: You can hold onto the account to see if your child changes their mind and does want to continue education after high school; you can make a non-qualified withdrawal from the account, which will include a 10% federal tax penalty as well as taxes on only the earnings in the account; or you can transfer the Ohio 529 account to a member of the family. This could be any of your child’s siblings, cousins, yourself, or even their children (your future grandchildren) without any penalties.
Second, you can now change your Ohio 529 account beneficiary online. Whether you are transferring the entire account or just part of the 529 funds to another member of the family, you can make this transaction online. You are still welcome to use the paper form if you prefer, but the online process will transfer those funds more quickly. And it’s simple to do.
Third, because of the ease of transferring your Ohio 529 account, this should address any concerns grandparents have about opening a 529 account for their grandchildren. Knowing that a cousin is considered a family member makes the CollegeAdvantage 529 program very appealing to because of its flexibility to transfer the 529 savings among cousins.
Fourth, one of the qualified higher education expenses for a tax-free 529 withdrawal is to pay principal and interest on qualified education loans for the beneficiary of an account or a specific member of the family - beneficiary’s siblings. The loan repayment provision applies to repayments up to $10,000 per beneficiary. The $10,000 is a lifetime amount, not an annual limit.
Visit Ohio’s 529 Plan online to start saving today for your child’s future education. An investment in a 529 plan is an investment in your child where every dollar saved today is a dollar that doesn’t have to be borrowed later. A 529 account can be used for whatever school comes after high school. Learn, plan, and start with as little as $25 with Ohio’s 529 Plan today at CollegeAdvantage.