Asked by Mary  |  Submitted September 03, 2014

Our independent student son is returning to school. If we make him owner of some of our existing 529 funds, will we be subject to gift tax?

Our son withdrew from college at age 19 and has subsequently married and is thus considered independent. We're trying to maximize his chances at financial aid. We have a daughter who will attend college next year.

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  Answers  |  1

September 04, 2014

Hi -
The annual gift tax exclusion allows you to give $14,000 per year to any one person without filing a gift tax return. A married couple who "join" in the gift can give away $28,000 in any one year without filing a gift tax return. The 529 rules have a special exception that allows five years' worth of gifts in one year (up to $70,000 or $140,000 for a couple) without a gift tax being imposed. I don't know if this exception applies to TRANSFERS of 529 accounts though - check with your CPA. Transferring the 529 account to your son will likely lessen his chances at financial aid. You should check with the school's financial aid office. Good luck!

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