Converting UGMA to 529 Plan
A client wants to convert a UGMA with $120,000 to a 529 plan for their child. IS there any limit or tax consequence from doing this transfer?
A client wants to convert a UGMA with $120,000 to a 529 plan for their child. IS there any limit or tax consequence from doing this transfer?
Permalink Submitted by mk foss on Thu, 2012-04-19 22:12
A UGMA asset is owned by the child not the custodian. So any transfer to the 529 plan is on behalf of the child, not the custodian.
If the plan is to make the child appear to have less assets for education assistance purposes, the strategy does not work.
Outside of that, the 529 must be opened with cash so there could be capital gains in converting the UGMA assets to cash.