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What is the best 529 Plan in California? | Tan Phan, MSFP, CFP®

hi everyone my name is tan and I'm an

independent certified financial planner

practitioner recently a friend asked me

what is the best spot to nine plan in

California that is a great questions and

I answered frequently let me start from

the history of fights when I plan to

implementing strategies if the tax law

changes in the future

quick history of Fontenoy plans Congress

created 49 plans in 1996 and they are

named after section 49 of the Internal

Revenue Code qualified tuition poker is

the legal name what all fights when I

plants and their advantages there are

two types of fights benign plans prepaid

tuition plans and saving plans five to

nine saving plans are the most popular

because of their flexibility which means

you can use the money in the five to

nine saving plans for any qualifying

school instead of the prepaid tuition

plan where you have to use the money for

that school you can use the money for

college and other post-secondary

training all for tuition in connection

with enrollment or attendance at a

elementary or secondary public private

or religious school for a designated

beneficiary such as a child or

grandchild buying and selling investment

inside the plan does not trigger a

taxable event earning all that tax if

used for qualifying expenses qualifies

expenses are tuition Roman feeds books

supplies equipment room and more

computer printer computer software and

used for educational purposes to be

qualified some of the expenses must be

required by the school and some must be

incurred by student who enrolled at

least half time almost anyone can open

the plan and name a beneficiary there

are no income limit restriction to open

the plan contribute to the plan or be

the beneficiary of the plan you can open

as many plants as you like there are no

tax consequences if you change the

designated beneficiary to another member

of the family any funds distributed for

my five to nine plan are not taxable if

roll over to another plan for the

benefit of the sent beneficiary or for

the benefit of a member of the

beneficiary family so for example you

can roll funds from the five to nine for

one of your children into a sibling plan

without penalty this gives you control

of the plan and flexibility to change

the beneficiary if a child doesn't need

the money for education change the

beneficiary to another family member you

get to decide how much to a draw from

the plan and who gets to benefit from it

they stay planning with five to nine

plans the contribution limit for five to

nine plan is normally the same as the

federal annual gift tax exclusion limit

the contributions for 2019 is fifteen

thousand which means you can contribute

fifteen thousand into the plan if you

want to if there are husband and wife

each can't contribute fifteen thousand

into the plan totalling thirty thousand

for 2019 you can also do a five-year

election which means you can't

contribute fifteen thousand times five

equals seventy five thousand into the

plan for 2019 which means you can write

a check for seventy five thousand and

deposit into a plan today remember you

can only do it's every five years and

you have to report on Form 709 when you

file your taxes for 2019 husband can

contribute seventy five thousand and

wife can't contribute Center five

thousand into the plan for a total of

150 thousand for 2019 if they want to

use the five-year election per child or

grandchild without triggering Federal

gift tax if you have four children that

is a hundred fifty thousand times four

equals six hundred thousand into a four

five to nine plans every five years the

six hundred thousand is considered a

complete gift and it's out of your state

there is no joint gift tax return so

each person has to file separately

why do investor do this

they want to move money out of their

gross estate and to maximize the growth

in the plan having seventy five thousand

in the plan and invested today versus

contributing fifteen thousand and

investing it's over five you can make a

big difference what is the best plan in

California currently there are no state

income tax benefit for five to nine

plans in California so you can pick

almost any plans which means there are

no tax deductions on credit some plans

you can look into our scholarship vengo

fidelity Blackrock American fund and

many others the best part to nine plans

in California for you depends on your

goals fun companies are making their

plans better by decreasing feeds that's

why you want to compare it and talk to a

professional before making any financial

decision here are some questions to help

you decide which plan is the best for

you and your family what is the total

expenses and fees on the account and

investment visitor and minimum account

balance to get started flexibility

contribution in the future how easy it

is to contribute and withdraw from the

plan are you buying the investment ed

net asset value

are there any sales fee to invest are

there any fees to roll over the plans to

another plan in the future investor are

doing it wrong what I'm concerned about

is the parents are not maximizing their

retirement accounts before starting at

five to nine plan for their kids the

rationale behind this concepts are you

can borrow for college but you cannot

borrow for retirement financial aid

waits heavier on five to nine plans than

parent retirement accounts what happens

if the kids get scholarships and don't

need the money in the fight when I plan

yes you can change the beneficiary but

what if there is no beneficiary to

change it to red flags I have seen five

to nine plans with high management fees

high minimum to get started

the parents left the money in cash and

did not invest it you might as well open

a saving account and leave it there

because the point of a fight to my plan

is to withdraw the gains without being

taxed and no taxes or buying and selling

inside the plan parents have outstanding

debts like credit card balance and

student loans that is a big no-no for me

because you are paying a high interest

that is guaranteed versus playing the

market in the final my plan

what am I mean by this is the investment

in the franchise plan can be positive or

negative depending on on what you invest

in with depth you have to pay the

interest no matter what I'm only saying

this because I care and I always want to

put investor in the best financial

position strategy to take advantage of

future tax law changes let's say you

have a Blackrock college advantage by 2

9 which is a Ohio plan your kid will go

to UC Berkeley 10 years from now the

state of California do have the right to

tax a qualified expense if used outside

state plans they are not doing it right

now but they do have the right to do it

in the future the solution is to roll

out the aisle plan to a California plan

such as a California scholarship r29 and

use it in California that way you don't

get taxed on qualifying expenses another

scenario is you have a Blackrock College

advantage by 2 9 which is a Ohio plan if

the state of California offer tax

deduction or credit in the future you

can roll out the Ohio plan into the

California plan if you start with a

California plan you don't have to open

another plan in the future if California

offer a tax deduction and credit in the

future for premium content please reach

out to me directly I will tell you which

is the best part when I plant in

California and why I haven't done a lot

of research so you don't have to to your

family success this is 10 your trusted

advisor

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