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#46194 - 08/03/10 09:53 PM Prepaying 4 yrs Tuition a Qualified Expense for a 529 "Savings" Plan?
3SonsCollege Offline
Visitor

Registered: 08/03/10
Posts: 2
Syracuse Univ will allow me to pay all4 years tuition (not fees or room & board) up front for my son (beneficiary). In this manner I will not have to bear their typical 5-6% annual increase for tuition. My son begins school this fall. I will pay it now and then plan on reimbursing myself from IL BrightStart accounts (one in my name and one in his name - UTMA). If I do this is the entire amount considered a qualified education expense? I don't want to pay taxes + 10% penalty on the gains in the accounts. Can I reimburse myself all at once this year or do I need to do it each year? There is a contract that would reimburse me/my son for semesters that he does not attend in case he changes his mind down the line.

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#46196 - 08/03/10 10:24 PM Re: Prepaying 4 yrs Tuition a Qualified Expense for a 529 "Savings" Plan? [Re: 3SonsCollege]
TexasCFP Offline
Member

Registered: 08/23/01
Posts: 867
Loc: Plano, TX, USA
Aside from your poor son's choice of schools (sorry, but Syracuse is the hated rival of all Georgetown Alum!) you shouldn't have any problem paying this bill as a qualified expense and taking a single distribution. I would carefully review the plan's reimbursement provisions, because walking home from one basketball game at the Dome in 10 degree weather with 3 feet of snow on the ground might cause him to rethink going back for the next semester! Maybe he can transfer to a better school!;-)
_________________________
David Hollands, CFP

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#46197 - 08/06/10 11:24 PM Re: Prepaying 4 yrs Tuition a Qualified Expense for a 529 "Savings" Plan? [Re: TexasCFP]
3SonsCollege Offline
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Registered: 08/03/10
Posts: 2
OK, I needed a laugh and that response provided one. Do you think I need to worry about the 1099-T that is produced each year by Syracuse. They will move money from the 4 yr pre paid tuition account to the normal account for each semester. Each semester will be billed. The school will then pay the difference if tuition has increased. My concern (actually, fear) is that my 529 plan will report to the IRS a large (4 yrs worth of tuition) amount and the 1099T amount reported to the IRS by Syracuse will be only the fall semester for 2010. Maybe I'm overthinking this?

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#46201 - 08/07/10 03:07 PM Re: Prepaying 4 yrs Tuition a Qualified Expense for a 529 "Savings" Plan? [Re: 3SonsCollege]
rsinj Offline
Member

Registered: 11/16/03
Posts: 1158
I think you're overthinking it. If you withdraw $X from the 529 and write a check to Syracuse for $X I think that's all that has to happen. Keep the documentation, any receipts from the school about the money movement each semester, and that's about it. If the IRS has questions, they'll ask, and you'll simply produce the paperwork/receipts. End of IRS questions.

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#46202 - 08/08/10 04:38 PM Re: Prepaying 4 yrs Tuition a Qualified Expense for a 529 "Savings" Plan? [Re: rsinj]
TexasCFP Offline
Member

Registered: 08/23/01
Posts: 867
Loc: Plano, TX, USA
I concur with rsinj's assessment.
_________________________
David Hollands, CFP

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#46208 - 08/12/10 02:24 PM Re: Prepaying 4 yrs Tuition a Qualified Expense for a 529 "Savings" Plan? [Re: TexasCFP]
Dopps Offline
Member

Registered: 01/23/02
Posts: 1343
Loc: Chicago area
Hey, the kid's presumably from IL (why else would anyone even consider using Bright Start?), so he's a hearty soul that can handle the winter. How did Bright Start turn out for you, 3Sons? I am not a fan of that plan, as I much prefer Bright Directions for us IL residents. I'm just curious to hear some customer feedback from someone who's been in and now out of the BS plan. Oh, and I concur with the others--you should have no problem should the IRS ask questions.

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