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Well, the Tax and Jobs Reform Law of 2018 answered part of that question, but as the regulations for the new law were framed, other possible planning questions and perspectives were possible. have also emerged.
The main change in this tax law was that it allowed the balances of 529 accounts to be “carried over†to an ABLE account, if the beneficiary of the 529 account was eligible for an ABLE account due to a disability. This change responded to a serious concern of many families who had accumulated funds in an Education Savings 529 that appeared to be “trapped” under a tax penalty.
The tax-free distribution rules for an ABLE account are more flexible than the traditional 529 plan, as ABLE accounts can be distributed for qualifying disability expenses which may include expenses related to education, housing, transportation, training and employment supports, assistive technology, support services, health care spending, financial management and administrative services.
Qualifying (tax-free) distributions for 529 Education Savings Plans, on the other hand, only include tuition and fees, technology, books and supplies, as well as housing and pension during post-secondary studies, although the law regarding eligible distributions has recently been expanded. to also include K-12 tuition fees and limited student loan repayments.
On the surface, it looks like the 529 switch to ABLE fixes some issues, and it does, but before they decide to complete this process, parents and caregivers might want to step on the brakes and consider a few issues.
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