WHEN PLANS CHANGE: WHAT TO DO WITH UNUSED 529 FUNDS
A 529 college savings plan offers more flexibility than you may realize.
Take a nonqualified distribution
If you’ve weighed all the options and don’t have any other use for your unused 529 funds, you can always take a nonqualified distribution. Because your contributions were made with after-tax dollars, they will not be taxed or penalized. However, any capital gains in your account will be taxed and can be subject to a 10% penalty.
But remember, there are no time restrictions with a 529 plan and circumstances could change in the future. A child or grandchild who chooses not to go to college now could change their mind later in life or decide on a professional study program.
In the meantime, you can still make contributions and continue to take advantage of the tax-free growth a 529 plan offers.
If you have questions about a 529 college savings plan and how it fits into an integrated wealth plan, contact an Edelman Financial Engines advisor today.