Student Question of the Week: 529 Contributions – Can I Contribute Stock?

Student Question from: Vincent C.
Course:  Fundamentals  – Education Planning

Student Question:

For the basic rule of only using cash contributions for 529 Plans, can you roll over appreciated stocks from UTMA/UGMA and ESA?  If so, do you have any taxable event tied to the rollover of stocks (if an unrealized gain exists)?

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Instructor Response:

Hi Vincent. 

This is a really good question.  Let me first say that unless you are a CPA, you will want to consult one before taking any action on something like this.   You don’t want to put a client in a bad situation with the IRS, nor do you want to put yourself at risk.  It’s very important that CFP^® Certificants do not give advice in areas they are not legally qualified to do so.

You can use money from a UGMA/UTMA to open a 529 Plan.  To do so, you must liquidate the assets, which would generally be a taxable event.  Again, it’s very important to consult with a tax professional if doing this because there are a few restrictions to be aware of and procedural steps you need to follow.

In regards to the Coverdell ESA, you can contribute to a 529 with these proceeds.  When you move money from an ESA to a 529, to avoid tax consequences, the transfer must be done in the same calendar year.

One more thing, in case I haven’t already mentioned it, be sure to CONSULT A TAX PROFESSIONAL before taking any action.

Hope that helps!