I learned about 529 plans and their insurance coverage.
Main Problem:
- The user is unsure if their 529 college savings plan is insured and has concerns about funding it correctly as a non-owner.
Solutions Discussed:
- Fidelity confirmed that units of the Fidelity 529 college savings plans are protected by the Securities Investor Protection Corporation (SIPC).
- The user can fund the 529 plan through mailed or electronic checks, direct deposits, or by transferring funds from a youth account with assistance from Fidelity.
- For bank account linking, the user’s parents, as participants, need to handle the process, but the user can still facilitate funding by having their parents call Fidelity to transfer funds from their accounts.
- Fidelity provides translators upon request for parents who may need assistance in a language other than English during future interactions.
- The user can change the beneficiary of the 529 plan after it converts to an individual account, but custodial accounts have certain restrictions until the beneficiary gains control.
- For tax implications regarding 529 plans in different states, the user is encouraged to consult a tax advisor for specific guidance related to New York’s tax rules.
Here’s the full thread
are 529 insured? i checked the site but theres no claim that it is insured or not by SIPC nor FDIC.
Hi, @J!
Thanks for joining our channel. Units of interest in Fidelity 529 college savings plans are protected by Securities Investor Protection Corporation (SIPC).
You can learn more about SIPC coverage here: https://www.fidelity.com/why-fidelity/safeguarding-your-accounts.
Please let us know if you have any other questions.
hey
Oh thanks
I made an individual 529 under my parents name and im the beneficiary but can I still fund it myself?
Of course! I am happy to help.
There are a couple of ways to contribute to a 529 plan. The participant (your parents) can process transfers between their Fidelity accounts or bank accounts online.
Non-owner individuals, such as yourself, have a few other methods available for making a deposit. The two most common would be mailed or electronic checks and direct deposit. You can also contact our 529 College Savings Plan team to make a transfer from your existing Fidelity Brokerage account to the 529 plan.
We can provide you with more detailed instructions if you have a preferred method.
Alright thank you so much.
My pleasure! Did you have any other questions I could answer today?
um yes
I tried linking my bank to the 529 and i accidentally clicked to sent money to someone else
instead of “myself”
To clarify, you are the listed beneficiary and not the listed participant, correct?
yes
it says the bank account is linked so it should be fine
I hope
The beneficiary is listed as a non-owner and does not have the ability to request distributions unless the participants grant them a certain level of authority. Additionally, only the participants can link a bank account to the 529 account.
If the bank has been added and you have been given the appropriate authority level, you can request a transfer to the bank on file through an associate.
You can contact our 529 team Monday through Friday, 8:00 a.m. – 9:00 p.m. ET. Simply say “529” or “college planning.”
Contact Us:https://www.fidelity.com/customer-service/contact-us
how do I get high enough authority?
That is something the participant needs to provide. You can have your parents contact us, and we can walk them through how to do that online.
alright and lastly if its a custodial 529, when beneficiary turns 18 does it become a individual 529?
The account does not automatically convert upon the age of majority. The participant would need to process a change of registration. Our 529 team can walk them through this when the time comes.
Additionally, the account will become restricted once you reach the age or majority for your state.
why will the account be restricted and how?
The account will be limited to closing transactions and withdrawals until it’s converted from a custodial 529 plan to an individual 529 plan. The participant can still log in and review the balance but deposited and opening trades are blocked.
once it turns into an individual 529 and I have leftover money in the account, can I name my sibling as a beneficiary
The participant can change the beneficiary subject to restrictions and requirements. This is processed through the “Transfer Beneficiary Form.”
Beneficiary Change (PDF) file:///C:/Users/a670191/Downloads/529_BENEFICIARY.pdf
so the difference between a custodial and individual is for custodial, you cant change beneficiary UNTIL the beneficiary gains control of the account
Not necessarily, the custodial account is considered an irrevocable gift, and the funds cannot be transferred to a different beneficiary. The non-custodial account does not contain this limitation, and the funds can be transferred between beneficiaries. Either way, you’d likely remain the beneficiary, and your parents would remain the participant.
I see
my parent isn’t fluent in english so I wanted to make it as convenient as possible for future withdraws and change of beneficiaries. Will there be translator when the time comes or will I have to sort that out?
We have translators available via phone upon request. When they call, they simply need to request a translator and state their preferred language. The representative will place them on hold, and bring a translator on the line.
Great
I also noticed a account and routing number on the 529 account. am I able to schedule a transfer through my bank using it to transfer money or do I have to add a bank account linked to fidelity?
The routing and account number are used for direct debit and direct deposit purposes. Direct deposit to those instructions would be one of the methods that non-owners could use, yourself included. You’ll want to make sure to watch out for contribution limits.
To link a bank account through Fidelity, your parents need to do that themselves online or by form. You would not be able to do that.
what is direct debit?
You can link of direct debit like auto-pay. So it authorizes a third-party vendor to pull money. This is not a feature you need to worry about for 529 plans, but it is technically the same information that would be used for a normal direct deposit. Also, there is a specific direct deposit form required for 529 plans. Your parents can contact 529 to talk through that process and obtain a copy of the form.
so what are other ways for a non-owner like me to fund the 529 beside direct deposits?
As mentioned above, mailed or electronic checks and direct deposit are the most common. But if you have a non-retirement account, you can call 529 to process a transfer between Fidelity accounts.
I have a youth account so if I fund that account, I can call for a transfer?
do I need a parent since they’re still the owner of the 529?
That can be done, you would fund the youth account and give us a call. We would fund the 529 account for you, just make sure you have the account number for the 529 account handy.
I already linked my bank account to my parent’s account, should I remove it or keep it there
Do you have a bank account linked to your youth account that can be used to fund it?
ya
Sounds good! You can log in to your youth account, fund it, and then give us a call so that we can help you transfer money to the 529 account.
As a reminder, Fidelity accounts are covered by the Fidelity Customer Protection Guarantee. Logging in with another individual’s account credentials, even those of a spouse or family member, violates our customer agreement and voids the Fidelity Customer Protection Guarantee. In the event that account owners would like to provide authorized access to another person, they can do so from their Profile page, under “Authorized Access,” on http://Fidelity.com.
Customer Protection Guarantee https://www.fidelity.com/security/customer-protection-guarantee
Alright thanks
Of course! We’re happy to help with anything else that comes up.
For the 529 plans on different state does it affect the tax deduction, I dont see a plan for ny resident and im from ny
Generally, clients who live in a state where Fidelity manages a 529 plan may be able to take advantage of some additional tax advantages.
As we are not tax advisors, we cannot speak to individual cases or situations. You’ll want to talk with a tax advisor familiar with your state’s tax rules to determine if there are certain tax deductions or qualified 529 distributions that your family can take advantage of.
If you have questions on a specific plan, we recommend contacting our 529 team directly to discuss which plan may work best for you.
Alright
What is the number for the 529 team
You can contact our 529 team by calling
(800) 544-1914, Monday – Friday between 8:00 a.m. – 9:00 p.m. ET.🟢