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No. of Recommendations: 2
I echo the notion of holding onto the account for a few more years. After DD has had a few more years as an adult, she may change her mind. And she is still young, so you may yet have grandkids, and you don't want to kick yourself for letting such an educational bounty go.

Fuskie
Who appreciates the feeling that something needs to be done immediately but he'd encourage continued patience and hope that she will change her mind both in terms of higher education and a family...

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I have approx $50K left in a 529 account as daughter decided not to go to college. There are no other possible recipients so I'd like to withdraw the funds.

I do not know the law, but is it a possibility to just leave the money in that account in case your daughter later regrets her decision not to go to college and then will need the money to enroll?
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The funds can be left in the 529 but it's been a couple of years and she's adamant she'll never go to college. No sign of any grandchildren either so I'd rather withdraw the money.
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0bes: "The funds can be left in the 529 but it's been a couple of years and she's adamant she'll never go to college. No sign of any grandchildren either so I'd rather withdraw the money."

I understand your preference, but like the other poster, I wonder if your daughter may attend another class or institution for 529 plans may be used?

See: https://www.savingforcollege.com/article/what-you-can-pay-fo...

Funds may be used for the enrollment or attendance at a college, university or "other eligible post-secondary educational institution".

An eligible institution which means that the institution is eligible for Title IV federal student aid; see, https://www.savingforcollege.com/eligible-institutions For example, the Culinary Institute of America in Hyde Park, NY is an eligible institution

Tuition costs at many trade or vocational schools are also considered qualified 529 plan expenses. I also expect that most community colleges are eligible (though you need to check specifically) and in addition to associates degrees many offer classes that are oriented to various trades or running a business.

I do not know what your daughter does or what she is interested in, but before you do withdraw please confirm that there is not an eligible course of study outside a a typical 4-year college or university that she might be interested in.

Regards, JAFO
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No. of Recommendations: 9
Daughter has a low income so my plan is to have the funds paid directly to her as the beneficiary, half this year and half next year.

I would emphasize that the money needs to be paid directly to your daughter in order for her to be the one who is taxed.

I assume she'll have to pay some tax on it and we'll also incur a 10% penalty on the earnings, but I can't think of a better option.

If she's single, even with no other income, a $25k withdrawal will result in taxable income of $12,450 after the standard deduction. The first $9,950 is taxed at 10% and anything above that (up to $40,525) will be taxed at 12%, so the ordinary income taxes on $25k would be $1,295 And yes, there will be a 10% penalty on the earnings. So if $15k of the $25k is earnings, that would add another $1,500, for a total of $2,795 Any other income would increase the taxes owed.

Is there anything I'm overlooking?

I would third the suggestion to confirm that there isn't any type of education/training that your daughter may want to use it for, including vocational training.

I would also point out that she should be sure to meet a safe harbor to avoid underpayment penalties. This may require her to make estimated tax payments.

AJ
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Thanks JAFO and AJ. Perhaps I'll withdraw it over three years to lessen the tax issues and give her time to change her mind!
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You might consider a scholarship for a well deserving student.

I believe your 529 plan is no longer limited to a relative. It can be transferred to anyone for their education.

Perhaps schools in your area or scouts etc can help you identify worthy applicants.
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No. of Recommendations: 4
I believe your 529 plan is no longer limited to a relative. It can be transferred to anyone for their education.

I do not believe that the beneficiary can be changed to anyone without tax consequences.

"Any change of the beneficiary to a person who is not an eligible member of the family of the current beneficiary is treated as a non-qualified withdrawal subject to applicable federal and state income taxes, as well as the additional 10% federal tax on earnings."
https://support.wealthfront.com/hc/en-us/articles/214676923-...


And older articles about changing 529 beneficiaries say the same.

Perhaps schools in your area or scouts etc can help you identify worthy applicants.
If he wants to donate his money in that way - that's up to him, but I think it has no bearing on getting the money out of the 529 and the taxes that will be owed on the money.


For the OP: "member of the family" includes cousins, aunts, uncles, and others. So if you or your spouse have siblings with kids, or even grandkids that will be needing college money in >2 years, possibly you can work out a deal with them.

And I'm guessing your kid somewhat recently finished HS, and currently dislikes the idea of going on for any further degree/education. I had some HS classmates that were that way, but went back to college to get a 2-year degree after a few years.
(and unless your daughter is in her 40s, grandkids are still a possibility - even then it's possible, but more likely would be via adoption)
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No. of Recommendations: 2
I echo the notion of holding onto the account for a few more years. After DD has had a few more years as an adult, she may change her mind. And she is still young, so you may yet have grandkids, and you don't want to kick yourself for letting such an educational bounty go.

Fuskie
Who appreciates the feeling that something needs to be done immediately but he'd encourage continued patience and hope that she will change her mind both in terms of higher education and a family...

-----
Premium Home Fool: Ask me a Foolish Question, I'll give you a Foolish Response!
Ticker Guide: The Walt Disney Company (DIS), Intuit (INTU), Live Nation (LYV), CME Group (CME), MongoDB (MDB), Trip Advisor (TRIP), Vivendi SA (VIVHY), Mimecast (MIME), Virgin Galactic (SPCE), Axon Technologies (AXON), 51Jobs (JOBS)
Disclaimer: This post is non-professional and should not be construed as direct, individual or accurate advice
Disassociation: The views and statements of this post are Fuskie's and are not intended to represent those of The Motley Fool or any other sane body
Disclosure: May own shares of some, many or all of the companies mentioned in this post: https://tinyurl.com/FuskieDisclosure
Fool Code of Conduct: https://www.fool.com/legal/the-motley-fools-rules.aspx#Condu...
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