Rolling over Coverdell to 529
I have a client who has over $40,000 in a Coverdell plan for her son who is over age 21 and under age 30. The son is out of college and is subject to paying taxes on the gains in the Coverdell account once he turns 30. Can we roll over the Coverdell to a 529, then a portion to the Roth?
I’m in the retirement space and don’t come across education accounts often. I could use some guidance on what to do with a Coverdell account that won’t be used for higher education expenses. Thanks.
Permalink Submitted by Alan - IRA critic on Thu, 2023-03-23 20:18
The rollover to the 529 can be done, but amounts contributed to the 529 within 5 years of any Roth transfer are not allowed to be transferred to the Roth IRA. There are issues with Sec 126 of Secure 2.0 that will have to be clarified by the IRS before these Roth rollovers can be done. One such issue deals with change of 529 beneficiaries.