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What happens if I have money in a 529 account for a grandchild who later decides to not attend college?
One option you would have is to change the beneficiary to another member of the family. That could be the current beneficiaryís brother or sister. It could also be the beneficiaryís cousin. You could even move the beneficiary up or down the family tree, naming the beneficiaryís child, parent, or even yourself as replacement beneficiary.
Another option you have is to take the money back out of the 529 plan for yourself. However, you probably wonít want to do this unless you have a real need for the funds. Any earnings growth in the account will be taxable to you at your ordinary income rate plus a 10-percent penalty rate. The fact that the account beneficiary can be changed as many times as you want means that any excess funds in your 529 plan can remain there to be passed down from generation to generation (check to see if your 529 plan has a restriction on how long the account can stay openómany do not).
- How can I select the right 529 plan if I donít know where my grandchildren will be attending college?
- What happens if I have money in a 529 account for a grandchild who later decides to not attend college?
- I would like to put some money towards my grandchildrenís college savings, but Iím worried about unplanned medical expenses or other financial needs I may have later on. Can I get my money back out of a 529 plan?
- Which investment option in the 529 plan should I choose for my grandchild?
- We have 16 grandchildren below college age. Should we set up a separate 529 account for each of them, or can we combine the savings into just one account?
- Instead of opening my own 529 accounts, can I just make contributions to the 529 accounts my children have already established for my grandchildren?
- How do Coverdell education savings accounts compare to 529 plans?
- If I ever need to go to a nursing home and apply for Medicaid benefits, will the 529 accounts I have set up for my grandchildren be counted as part of my assets?
- What happens to my 529 plan if I die or become incapacitated?
- Am I hurting my grandchildís eligibility for financial aid by putting money into a 529 plan for him?
- My tax adviser is recommending 529 plans as an estate-planning vehicle. What is the advantage?
- Iíve been making direct gifts to my grandchild each year into a custodial account (UTMA) with the understanding that those funds are to be used for college. Is there anything wrong with this approach?
- My estate planner tells me I can reduce my estate by paying my grandchildrenís tuition and not even have to worry about the gift tax. So why should I use 529 plans?