I have some money languishing in a CD. I rigged the baby pool when my "nephew" [best friends son] was born and set my ill gotten gains aside for his education.
I would like to open a 529 for him. I understand that I am allowed to open a 529 for any beneficiary. What I do not understand is what the implications of that might be for taxes, or total contributions from his father or other family members.
His father and I are trying to decide if it is better for me to open and manage a 529 or for his father to do it and simply accept a gift from me.
Points I am considering:
- My nephew lives in Ohio. I live in Kentucky. Does this in any way affect benefits for the fund or eligibility for in-state tuition?
- How does the tax situation work if more than one person has a 529 with my nephew as the beneficiary?
- How do gifts to a 529 work? The donations should largely be hundreds of dollars presented as checks. Do larger donations or more regular contributions get taxed differently?
The overall question is: Given the circumstances above, what is the best way for me to contribute to loved ones education to get the most benefit for the child with a minimal impact on managing the fund and a minimum of taxes?