Dear Liz: I have one 529 plan for my niece who is now a college graduate. She has student loan debt and would like to use the money left in the 529 account to pay off this debt. Is it admissible without incurring penalties?
Reply: Yes, up to $ 10,000.
The Setting Every Community Up for Retirement Enhancement Act, or SECURE Act, of 2019 allows a beneficiary a lifetime limit of $ 10,000 to repay their student loans, including federal loans and most private loans, without taxes or penalties. . You can withdraw an additional $ 10,000 to pay off student loans for each of his siblings.
If there is still money left in the 529 after that, you have the option of changing the beneficiary to another eligible family member (including spouse, children, siblings, in-laws, aunts and uncles, nieces and cousins, parents and grandparents). You can also change the beneficiary to yourself, as the account holder. Such beneficiary changes preserve your ability to make tax- and penalty-free withdrawals for eligible education expenses.
Give access to the account to executors
Dear Liz: We try to keep our affairs in order for our executors. (Have mercy. We have substantial accounts and assets in England and Canada as well as the United States!) Thinking of some immediate expenses they will have, I have documented the details on how to access our online accounts (passwords coded so that a family member will understand). But am I asking them to do something illegal?
Reply: If a site has a password, it probably also has a “terms of service” agreement that prohibits you from sharing that password with anyone else. You may be able to add someone else’s name to a financial account, but this is often not desirable, either because you do not want to give them access before your death or incapacity, or because you do so. could have tax implications on donations.
The most practical solution is to create a list of accounts with your login credentials and make sure your executor knows where to find them. (By the way, you should probably only have one executor, with a few backups. It’s a big job that gets infinitely more complicated when two or more people have to agree on decisions and sign every document.) You will also need to keep the list up to date, which can be a big task. A password manager might be a good solution, as your executor would only need to know the master password to access your accounts.
Also, make sure that your executor has the passwords for your email addresses as well as your computers, tablets, and cellphones. Otherwise, the executor may not be able to receive identity verification codes and links to access your accounts.
About Spouse and Survivor Benefits
Dear Liz: I am 82 years old and I receive $ 786 from Social Security. My wife is 75 years old and receives $ 1,400 from Social Security. I believe you said a lower beneficiary could get the same amount as the higher beneficiary. When I contacted Social Security, I was informed that my benefit had to be less than half that of my spouse to be eligible. When I asked him where in the regulations I could find this information, he abruptly hung up. Was he right?
Reply: Yes. The only time you would get the same amount as your wife is if she died, and then you would only get the survivor benefit (one check for $ 1,400, instead of the two checks totaling $ 2,186 that you now receive as a couple).
Survivor benefits are different from spousal benefits. Spousal benefits are what you may receive while your wife is alive. Spouse’s benefits can be up to 50% of the highest employee’s âprimary insurance amountâ or what she was entitled to at full retirement age. If your retirement benefit is greater than the amount of the spousal benefit, you will receive your own benefit rather than the spousal benefit.
The Social Security website contains a lot of information on how benefits work as well as calculators to help you estimate your benefits. You can start by reading his publication called âRetirement Benefitsâ at https://www.ssa.gov/pubs/EN-05-10035.pdf.
Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions can be sent to him at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.