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>> OK, the Education IRA can only be used for schooling. What happens (trying to see all sides of this) if the child does NOT got to college (I know, bite my tounge <G>). What happens to the money in the Educational IRA?
It's a reasonable question.

Distributions from the education IRA are tax-free if used for qualified educational expenses. These include tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. Part-time enrollment is OK. For a student who enrolls at least half-time, room and board also count.

An eligible institution is a post-secondary institution offering credit toward a bachelor's, associate's, graduate, or professional degree, or other recognized post-secondary creential, including colleges, universities, and vocational schools as long as they are eligible to participate in ED student-aid programs. So some non-college vocational programs will qualify.

If the beneficiary of the education IRA does not have any qualifying expenses, it's possible to change the beneficiary to almost any family member.

The proposed technical corrections bill would require that the IRA be distributed no later than 30 days after the beneficiary's 30th birthday. If it hadn't been used for the beneficiary's education, it could still be transferred to another beneficiary.

If distributions are taken for non-educational purposes, the portion attributable to earnings (but not the original contributions) is taxed as ordinary income, and is subject to an additional 10% tax. There are exceptions for the beneficiary's death or disability.
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