Q. What if you have this (Section 529) plan for a child and none of the children go onto college, what happens to the money?
Also, is this plan limited to only the state schools of which state you live in or can they go to any state college? Does it have to be a state college? Can it be a private school?
Betty
Betty:
There are a number of different programs available to you. Each program may have different rules. As a general rule, you have several options available if the beneficiary decides not to go to college:
- Change beneficiaries to someone else (another family member or even yourself),
- Defer use and leave contributions invested in the account, or
- Withdraw the assets in the account.
If the assets are withdrawn, the assets go to the account owner. Accumulated earnings will be subject to income taxes and a 10% additional tax.
Most, if not all, state programs now allow the 529 assets to be used at any eligible educational institution in the country to pay for qualified higher eduction expenses.
To be an eligible educational institution, the institution must be eligible to participate in the U.S. Department of Eduction student aid program. This certainly includes most colleges and universities, whether public or private.
Jim
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