Question: Is anyone here a financial advisor, CPA, or tax preparer/attorney?

[marvin martian]

I have a dilemma. We have a substantial 529 account for our two daughters. Older daughter got a full 4 year scholarship and is going into her third year of college. We just found out our younger daughter also got a full 4 year scholarship, she is starting college in August.

We're not going to spend much of the 529 for college, maybe 10% of the balance at most. What can we do with the remaining money in the 529 account? Can it be given to future grandchildren? Also, what types of taxes/penalties is it subject to if we do take it out or reclassify it? Capital gains?

Looking for advice here...thanks in advance.

 

[Toddsterpatriot]

5 ways to spend leftover 529 plan money (savingforcollege.com)

 

[John09]

Here are a couple of informative links. There's loads of them out there, as it's a common issue. I'd urge you to talk to a professional. (Congrats, it's a nice dilemma...)

https://www.usnews.com/education/best-colleges/paying-for-college/articles/avoid-529-plan-withdrawal-penalty-if-your-child-skips-college

A Penalty-Free Way to Get 529 Money Back

Your 529 plan withdrawals that aren’t used for qualified education expenses can be subject to tax and a 10% penalty. Here’s how to avoid that penalty.

www.investopedia.com

Relevant quote from the 2nd link:
The scholarship exception, however, lets you withdraw up to the amount of that scholarship and use the money for any purpose penalty free. The earnings on that portion of the distribution will still be subject to income tax. However, if you use the withdrawal for qualified educational expenses, the money will be both tax and penalty free.

 

[Shelzin]

I have a dilemma. We have a substantial 529 account for our two daughters. Older daughter got a full 4 year scholarship and is going into her third year of college. We just found out our younger daughter also got a full 4 year scholarship, she is starting college in August.

We're not going to spend much of the 529 for college, maybe 10% of the balance at most. What can we do with the remaining money in the 529 account? Can it be given to future grandchildren? Also, what types of taxes/penalties is it subject to if we do take it out or reclassify it? Capital gains?

Looking for advice here...thanks in advance.

One Solution