529 plan what happens if no college

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Option 1: Use the Funds for K Education and Postsecondary Training One of the most common misconceptions about the college savings plan is that it is a college or university savings plan.

Option 2: Transfer the Plan to An Eligible Beneficiary Funds in a college savings plan can be transferred to a family member of the beneficiary once per year with no consequences. Option 3: Disability and Special Needs Many parents began a college savings plan as soon as their child is born, only to discover that their child has a disability and may not attend college.

Military Academy If the beneficiary attends a military academy, you can withdraw the funds without penalty. Scholarships If that the beneficiary earns a scholarship, you can withdraw up to the amount of the scholarship award penalty free. Death If the beneficiary dies, the account holder can withdraw the money without penalty. Disability If the beneficiary is diagnosed with a disability, you can withdraw money from the account to pay for some expenses related to the disability.

Keep in mind, however, that you'll owe federal and state taxes on the funds, along with an additional 10 percent penalty on your account's earnings, according to the Securities and Exchange Commission SEC. However, there may be special circumstances where penalties are waived on a withdrawal. For example, the SEC says if your child receives a scholarship, you may be able to withdraw plan funds without a penalty. It's a good idea to discuss any potential tax or penalty implications with your plan's administrator prior to withdrawing funds so you know what to expect.

Have questions about starting a plan or how you can use its funds? Talk to your tax or financial professional, or the administrator of your plan, for more information. Retrieve a saved quote. Skip to main content Explore Allstate. Popular Searches. Allstate We help customers realize their hopes and dreams by providing the best products and services to protect them from life's uncertainties and prepare them for the future.

Skip to main content Toggle navigation Log in. Edit location. Select a product to get a quote. College Planning Accounts. Small Business Accounts. Open an account. Open Menu bar. Ask Merrill. Why Merrill Edge. General Investing Online Brokerage Account. Life events. Life priorities. Investor education. Tools and calculators. Contact us. Open an account with Merrill. Helpful resources. Answered by. If your child doesn't go to college, receives a scholarship or if some other situation arises where you have excess funds — you have the following two options for using the leftover amount in a education savings account.

But, there are certain limitations:. With plans you can change beneficiaries without negative income tax consequences — if, say, the original beneficiary decides not to attend college or receives a scholarship and doesn't need some or all of the funds — as long as the new beneficiary is a member of the original beneficiary's family. You just change the name of the account's beneficiary to someone else in that person's family or transfer a portion of the assets to the other beneficiary's When it comes to rollovers, the IRS rules allow one income tax-free rollover of one account into another for the same beneficiary within a month period.

Two reasons you might consider a rollover:. So what's the answer? Absent further guidance from the IRS, the following advice seems prudent:. You can withdraw as much money from your plan as is required to pay the post-secondary student's qualified education expenses, without incurring taxes.

It will show what you paid for tuition and related expenses. For room and board you'll need to consult the bills you received from the school. Note that if a student lives off campus, their qualified room and board expenses can't exceed the college's official cost of attendance figures for those costs; that information should be available on the school's website. You'll have several options. One is to simply withdraw the money and pay the taxes and penalties.

Another is to change the beneficiary on the account to another family member. And given college costs today, every little bit helps. Internal Revenue Service. Accessed Nov. Saving For College. Traditional IRA. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.

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