During the last 20 years, I contributed $25,000 to a 529 account for my granddaughter. Its current value is $75,000.
She is interested in going to Le Cordon Bleu in France.
It’s my understanding that none of her educational expenses would be qualified educational expenses for purposes of 529 distributions.
If she sent me receipts for her unqualified educational expenses and I reimbursed her from her 529 account, is she responsible for any penalties and taxes, or am I?
Regardless, could I include in the distribution an amount to cover the anticipated penalties and taxes and the penalties and taxes on the penalties and taxes included in the distribution?
If unqualified distributions from the 529 account are made payable to you as the account owner, you would be responsible for taxes and penalties on the earnings portion of any unqualified distributions. If the unqualified distributions are made payable to your granddaughter, she would be the responsible party. You can request as large an unqualified distribution as you want until you drain the account. Just know that whoever receives any unqualified distribution (you or your granddaughter beneficiary) will be responsible for paying the taxes and penalties on the earnings.
Are you sure that none of her expenses are qualified?
As an example, one of our daughters attended university in Canada. Before she decided which university to attend, I found a list of universities in Canada that were approved for use of 529 funds. It included every university in Canada that I had ever heard of, some that I had never heard of, and many that most people here have never heard of.
Just now I Googled “le cordon blue france 529 funds” (yes, with bleu misspelled) and found an article that states:
“An eligible institution is defined as a college, university, vocational school or postsecondary institution eligible to participate in federal student aid programs administered by the U.S. Department of Education. Examples of nontraditional schools that are eligible include the Golf Academy of America; the Le Cordon Bleu College of Culinary Arts; the commercial diving program CDA Technical Institute in Jacksonville, Florida; and the Chicago Theological Seminary.”
EDIT: It appears that there might also be a “Condon Bleu” in the US. I do not know which one this refers to. Some further checking on this seems like a good idea.
If you have taken out less than the educational costs, you might not owe any penalties. Tuition and fees are allowed. Room and board expenses are allowed. Transportation I am pretty sure is not allowed.
If unqualified distributions from the 529 account are made payable to you as the account owner, you would be responsible for taxes and penalties on the earnings portion of any unqualified distributions. If the unqualified distributions are made payable to your granddaughter, she would be the responsible party. You can request as large an unqualified distribution as you want until you drain the account. Just know that whoever receives any unqualified distribution (you or your granddaughter beneficiary) will be responsible for paying the taxes and penalties on the earnings.
Prior to submitting my post, no, I wasn’t sure. However, I found your reply intriguing and so I did a little Google searching, too.
I have not yet found a list of universities, domestic or international, that are approved for use of 529 funds, but I am still looking for it.
I would greatly appreciate it if someone could point me in the direction of such a list.
I did find an FSA database in Excel titled 2023–24 Federal School Code List of Participating Schools (2023-08-10) at [I cannot include links in my posts… What a pity!].
First and foremost, I don’t know whether this database is the controlling document for 529-eligible international institutions.
Does anyone here know?
For point of discussion, let’s assume the database is the controlling document for eligible international universities. In this case, then none of the Le Cordon Bleu College of Culinary Arts locations are eligible for 529 distributions since none of them are listed in the datebase.
I found the same paragraph in a US News and World Report article titled 4 Surprising Places to Use 529 Plan College Savings dated April 6, 2016 at [I cannot include links in my posts… What a pity!].
If the database mentioned above is not the controlling document for 529-eligible international universities, then there is still hope.
Clearly, knowing whether or not the database above relates to 529 accounts or getting a copy of the list of 529-eligible international universities is critical to make any determination.
Thank you very much for your insight. I look forward to what you and others have to say on this issue.
I was able to find a list of international colleges that accept federal financial aid, which articles I have seen indicate is necessary in order to be able to use 529 funds without penalty. Le Cordon Bleu is not on the list. However, I have also seen articles that specifically state the school is eligible (they are a few years old, though). If I were you, I’d keep researching, in case it is.
(A tangent: looking over the list - seems like they should just include Germany’s universities as another state in the USN Rankings . I has more pages of eligible colleges than our colonial parent!)
I’ve been looking at this recently because D24 is considering adding some international schools and we really need to be able to use her 529.
What I found helpful was googling each school name and title IV (title IV is eligible for federal funds, which as @kelsmom said is how they determine whether you can also use 529 funds without penalty).
Doing this picked up several Le Cordon Bleu schools in the US, but not the one in France.
. I has more pages of eligible colleges than our colonial parent!)