529 Plans and Qualified Charitable Distributions: Today’s Slott Report Mailbag

Thursday, January 18, 2024

By Andy Ives, CFP®, AIF®
IRA Analyst
Follow Us on X: @theslottreport

QUESTION:

I have been funding a 529 account for over 15 years and no longer need to add deposits.

Could I change the beneficiary to myself and then convert to a Roth IRA, assuming I have met the 5-year deposit hurdle as well? Has the government ruled on when the clock starts for the 15 years? Meaning, is it from when you open the account or does it restart when you change the beneficiary?

Thanks!

ANSWER:

This question is timely as I wrote an article about this topic just yesterday for the Slott Report. The link is here: https://www.irahelp.com/slottreport/529-roth-now-available-questions-persist

529 dollars can be rolled to a Roth IRA for the 529 beneficiary, but only after the 529 account has been open for at least 15 years. Yes, you can change the beneficiary of the 529 to yourself, but we still do not know if that will result in a reset of the 15-year clock. As such, it might be best to delay any beneficiary changes until we have definitive guidance from the IRS.

QUESTION:

Once the beneficiary of an inherited IRA has reached 70 ½, is the beneficiary eligible to make qualified charitable distributions (QCDs) annually?

Dale

ANSWER:

Dale,

Yes, QCDs can be done from an inherited IRA once the inherited IRA beneficiary is age 70 ½ or older. All the normal QCD rules apply – like the fact a person must actually be 70 ½ to do the QCD. It is not good enough to be turning 70 ½ later in the year. Also, it does not matter how old the original IRA owner was when they passed away. That has no bearing on QCD eligibility from the inherited IRA. (Note that the QCD limit is indexed for inflation and has been adjusted to $105,000 for 2024.)

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