The 529 Plan is one of the options parents have to bankroll their childrens college education. Saving up for college should begin years in advance and the balance grows by a certain percentage every year, tax-free (especially for state-sponsored plans). There might be one slight problem though what if your child decides against going to university, and has, instead opted to take elective units in community college, or has chosen to work soon after graduating from high school.
So you have all that money ready for spending; it can be bewildering to have saved so much through the years and find out the funds will not be tapped after all. You had hoped your pride and joy would enter one of the top schools, with annual tuition fees topping several tens of thousands of dollars a year. How do you put that money to good use, if it cant be used anymore for the purpose it was originally meant for? Accurate US Educational Financial solutions reviews can give you ideas on how to husband the sudden cash trove in the 529 account.
A part of you might think about withdrawing the money right away. Running the numbers with your financial adviser can raise some red flags. For one thing, you will be forced to pay a corresponding federal and state income tax according to the beneficiarys tax bracket. Account for a 10% penalty on a non-qualified withdrawals earnings, plus additional state charges, if you take the withdrawal option. However, if your child landed a scholarship, you can still withdraw up to the scholarships value without penalties.
If your child opts not to use the 529 account at all, your finance specialist can recommend changing the beneficiary to a sibling or a first cousin. No taxes will be imposed when this happens. When you change the beneficiary to another generation like your grandchild, a gift tax liability will be imposed on the original beneficiary.
Some financial experts may suggest keeping tabs on the accounts balance and the investments they are used on. However, you can consider a switch of plan if the performance is found wanting.
The money that has been sitting in the 529 account can be considered as a special fund for future purposes. Consult with some financial wellness service, such as the US Educational Financial Solutions Reviews to help you weigh your options. Read up at savingforcollege.com/questions-answers/article.php?article_id=21.