Nine reasons why every 'Modern Family' needs a 529 plan

http://www.savingforcollege.com/articles/nine-reasons-why-every-modern-family-needs-a-529-plan-735

When it comes to saving for college with a 529 plan, are you worried that your family doesn’t fit the mold? 529 plans generally have no income limits and very small contribution requirements, making them accessible to a wide variety of households. In fact, according to data from Strategic Insight, there are over 7 million families currently using the tax-advantaged savings tools. Even President Obama retracted his proposal to remove 529 tax benefits after he realized just how many people depended on them. So even if you don’t have two kids, a dog, and a white picket fence, a 529 plan can still help you pay future tuition bills.

The following slideshow looks at one of America’s favorite unconventional families and how each member can enjoy the benefits of a 529 plan.

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1. Lily-Tucker Pritchett

• In season one, Mitch and Cam adopt Lily, at baby girl from Vietnam. Since they are both college graduates, we expect they have the same high hopes for their daughter.
• The adoption process may take time, but that doesn’t mean you have to wait to start building a college fund.
• Simply open a 529 plan, name one of the parents as the beneficiary and start making contributions. You can change the beneficiary to the child once you have their social security number.

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2. Cam Tucker

• After high school, Cam was a starting center for the University of Illinois football team, but we learned in season three that the sport was not his true calling.
• Before he met his husband Mitchell, Cam went to clown college and acted as a clown named Fizbo.
• It’s likely that Cam earned an athletic scholarship to U of I. So if he had leftover savings in his 529 plan he could have used them to pay for his clown college, as long as the school was considered an eligible institution for the purposes of Section 529.

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3. Manny Delgado

• Manny is not your typical kid. He drinks coffee, wears suits and enjoys poetry.
• He lives in California with his mother Gloria and stepfather Jay, but his birth father and other family members live in Colombia.
• If Jay and Gloria are saving for Manny’s college in a 529 plan, he can choose to go to school in the U.S. or attend an eligible Colombian school.

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4. Jay Pritchett

• At age 65, Jay has a surprise 3rd baby with his second wife, Gloria.
• He is the successful owner of Pritchett Closets and quite wealthy.
• Jay may want to consider using his baby son’s 529 plan as an estate planning tool. His contributions up to $70,000 will qualify for the annual gift tax exclusion if he elects to treat the gift as if it were made over a five-year period.

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5. Luke Dunphy

• Luke is the youngest of Claire and Phil Dunphy’s three children and certainly not the brightest (although in real life actor Nolan Gould graduated high school when he was 13!)
• When Luke was born, Claire and Phil were probably wondering if they should open a separate 529 plan for him, or if all the children could use the same plan.
• There can be only one beneficiary per 529 plan, but once a student is done paying for college you can change the beneficiary to a younger sibling. We generally recommend using separate plans, however, so that each plan can be designed to meet specific investment objectives of the child based on their age.

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6. Alex Dunphy

• Alex is the middle Dunphy child and undoubtedly the smartest. Phil and Claire may hesitate to open a 529 plan for her because they know she will get academic scholarships.
• Normally, when you spend your 529 funds on something other than school you will end up paying income taxes and a 10% penalty. But if a student gets a scholarship, the penalty will be waived on non-qualified withdrawals up to the amount of the tax-free scholarship.
• In season six, Alex begins her college search and is considering an out-of-state school (MIT). Her parents should be relieved that they can use her 529 savings at almost any school in any state, no matter where they live.

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7. Hayley Dunphy

• Hayley, the oldest child in the Dunphy home, gets kicked out of a four-year college in season four and is forced to move back home with her parents and enroll in community college.
• Claire and Phil can use her leftover 529 savings to pay for Luke’s college by changing the beneficiary.
• Or they can encourage her to explore other areas of interest such as a vocational school focused on beauty or fashion.

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8. Claire Dunphy

• As her children get older, Claire is eager to get back in the workforce. Prior to becoming a mom, she was headed toward a successful career in hospitality management.
• She tries out a job in real estate, and eventually starts working for her father as a manager at Pritchett Closets.
• It’s clear that Claire has some trouble getting along with the staff. To help the issue, she can use some of Hayley’s leftover 529 money to take a management class at a community college.

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9. Phil Dunphy

• Phil, the head of the Dunphy household, is a real estate agent who is constantly in battle with his rival, Gil Thorpe.
• Phil enjoyed his time at college and earned his degree, but he may be able to benefit from an additional class or two.
• As we saw this season, Phil is quite tech savvy and could use 529 funds to pay for an online college course.

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