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> fact that the grandparents spend a higher portion of their proceeds on education $0 has been spent on education so far. $2m has been put into an investment a

> fact that the grandparents spend a higher portion of their proceeds on education $0 has been spent on education so far. $2m has been put into an investment account whose realized gains are tax free. You can bet people withdraw with the 10% penalty all the time to spend that money on whatever they want, not college. The state also runs its own investment accounts, like this individual does, and spends it on many totally worthy concerns, like paying pensions that are used by beneficiaries to pay for housing, food and indeed, sometimes education, so maybe that's the more appropriate comparison. > they could just as easily gifted their grandkids that much money, tax free (federally, at least) I don't think that's true, and your information appears to be the result of doing Google searches on SEO'd tax and accounting law partnership pages. It seems like there a lot of misunderstandings anyway about how this stuff works. Can they reduce the taxes they would otherwise pay on the lotto income? Of course, creating 14 529 plans (as opposed to say, 1, or 0) is an important part of that strategy. Then there are so called experts working in finance chiming in, which if I could point to anyone being a complete waste of money for baby boomers in the last 20 years, it’s CFAs collecting 1.0-1.5% AUM every year on top of mutual fund fees that all underperformed low cost indices. The kind of assholes who, in the absence of any normative measure, have finally settled on justifying their high fees as “not answering the phone when you want to panic sell.” It’s infuriating, honestly, the lack of any sophistication whatsoever and the trust put into total leeches like CFAs. And here we are, getting lost in the tax details, from people who would balk at paying a retainer for an ongoing professional opinion instead of a management fee - when those opinions could save them literally millions over the lifetime of a windfall like this - and wind up on SEO’d advice pages googling stuff themselves instead. A bunch of temporary embarrassed billionaires Googling, shitting on how the state spends money, voting in tax cuts for people much richer than them. I don’t have expertise either, I’m not a lawyer or an accountant ,but consider paying one the pathetically small fee it would cost to get an answer to these questions that make sense for you and your situation.

sokoloff 6y ago
> $2m has been put into an investment account whose realized gains are tax free. You can bet people withdraw with the 10% penalty all the time to spend that money on whatever they want, not college. The gains are tax-free iff spent on qualified expenses. Non-qualified distributions from a 529 pay ordinary income taxes on the realized gains on top of the 10% penalty. As a tax avoidance scheme, this one is pretty terrible.
1123581321 6y ago
I worked in finance for awhile and we almost never saw 529s being withdrawn for non-education expenses. When it happened it was for financial emergencies, which presumably these people wouldn’t have. The rest of the dispute aside, 529s really are used for education.
dahinds 6y ago
the federal lifetime exemption for gift taxes is >$10 million (and double that for a couple) so I think it is entirely true.
mywittyname 6y ago
> I don't think that's true, and your information appears to be the result of doing Google searches on SEO'd tax and accounting law partnership pages. It's absolutely true. You can give up to $15k a year to anyone. If you gift more than that amount to certain people, you have to file Form 709 with the IRS. Income taxes are due on the amounts after total lifetime gifts to a person exceed the lifetime exclusion limit, which is currently $11,700,000. If married, these numbers are doubled, as each spouse may gift individually. But even if none of this applied, you can find a list of exclusions right on the IRS website, which states: Transfers Not Subject to the Gift Tax Four types of transfers are not subject to the gift tax. These are: Transfers to political organizations, Transfers to certain exempt organizations, ***Payments that qualify for the educational exclusion, and*** Payments that qualify for the medical exclusion. I'm not some "temporarily embarrassed millionaire" making shit up from a Google search. I have family to whom I gift money, which means I file this form every year. Congress is full of a bunch of wealthy elites looking out for their own interests. Thus, gifting money tax-free is not difficult, at all. Also, I'm pretty left leaning. My shitting on the state for mismanagement of (and outright lies on the use of) lottery funds is because I want them to be held accountable and live up to their promise.

sokoloff 6y ago

> $2m has been put into an investment account whose realized gains are tax free. You can bet people withdraw with the 10% penalty all the time to spend that money on whatever they want, not college. The gains are tax-free iff spent on qualified expenses. Non-qualified distributions from a 529 pay ordinary income taxes on the realized gains on top of the 10% penalty. As a tax avoidance scheme, this one is pretty terrible.

1123581321 6y ago

I worked in finance for awhile and we almost never saw 529s being withdrawn for non-education expenses. When it happened it was for financial emergencies, which presumably these people wouldn’t have. The rest of the dispute aside, 529s really are used for education.

dahinds 6y ago

the federal lifetime exemption for gift taxes is >$10 million (and double that for a couple) so I think it is entirely true.

mywittyname 6y ago

> I don't think that's true, and your information appears to be the result of doing Google searches on SEO'd tax and accounting law partnership pages. It's absolutely true. You can give up to $15k a year to anyone. If you gift more than that amount to certain people, you have to file Form 709 with the IRS. Income taxes are due on the amounts after total lifetime gifts to a person exceed the lifetime exclusion limit, which is currently $11,700,000. If married, these numbers are doubled, as each spouse may gift individually. But even if none of this applied, you can find a list of exclusions right on the IRS website, which states: Transfers Not Subject to the Gift Tax Four types of transfers are not subject to the gift tax. These are: Transfers to political organizations, Transfers to certain exempt organizations, ***Payments that qualify for the educational exclusion, and*** Payments that qualify for the medical exclusion. I'm not some "temporarily embarrassed millionaire" making shit up from a Google search. I have family to whom I gift money, which means I file this form every year. Congress is full of a bunch of wealthy elites looking out for their own interests. Thus, gifting money tax-free is not difficult, at all. Also, I'm pretty left leaning. My shitting on the state for mismanagement of (and outright lies on the use of) lottery funds is because I want them to be held accountable and live up to their promise.