unused 529?

[BuckyBadger]

What happens if you have a 529 that you don't end up using?

We haven't yet decided if we have kids, but due to the quality of the public schools in the area we just moved to make us pretty sure that we'd send any potential kids to private school.

So, considering that we might not even end up having kids, what happens if you start a 529 and then don't need to use it?

I know I'm WAY jumping the gun even thinking about this, but it made me wonder how those things work exactly.

[dczech09]

You can only set up a 529 plan if you have a beneficiary for it. So I am assuming that you do not have a 529 plan set yet?

Like I said, the only way you can set one up in the first place is to have a beneficiary assigned. If the beneficiary designated does not go to college, then you can change the beneficiary to anyone related to the previous beneficiary.

For example, if my nephew does not go to college, his 529 plan can be reassigned to his sister.

If there is no other beneficiary possible, then the money will obviously be used for something other than college expenses. In this case, you will be taxed on any investment returns (plus a 10% penalty).

Only investment gains would be subject to taxes and penalty as any money put into the 529 plan was already taxed.

[kork13]

Technically, either parent could be set as the beneficiary to get the account started, then it could be later assigned to a child. But I think OP is just asking hypothetically for if/when any future children come along...

Also, I may be mistaken, but I thought 529's could be used for ANY education expenses... to include private school tuition for kids from K-12. But I'm no expert, so I'd need confirmation on that count.

The other way that I believe you can get around the tax & penalty of not using all of your 529 money is that you can transfer the account to a child's cousin or other close relative. But again, not talking as an expert here...

[Like2Plan]

Also, I may be mistaken, but I thought 529's could be used for ANY education expenses... to include private school tuition for kids from K-12. But I'm no expert, so I'd need confirmation on that count.

Kork,
You're probably thinking of a different education savings plan called a Coverdale which has different rules

"There is no tax on distributions if they are for enrollment or attendance at an eligible educational institution. This includes any public, private or religious school that provides elementary or secondary education as determined under state law. Eligible institutions also include any college, university, vocational school or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. Virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions are eligible."

Coverdell Education Savings Accounts

Unfortunately, 529's are only for college and other post-secondary training.

[BuckyBadger]

Oh, good to know! I thought 529's were for all education, too.

We're a long way off from this, but it's good to know what we might be getting ourselves into!

[Like2Plan]

What happens if you have a 529 that you don't end up using?

We haven't yet decided if we have kids, but due to the quality of the public schools in the area we just moved to make us pretty sure that we'd send any potential kids to private school.

So, considering that we might not even end up having kids, what happens if you start a 529 and then don't need to use it?

I know I'm WAY jumping the gun even thinking about this, but it made me wonder how those things work exactly.

As previously mentioned, you have to name a beneficiary in order to start an account. As Kork pointed out, you could name a parent and then change the beneficiary later to your child.

But, at the end of the day if the money is not used for college or post-secondary training (there are a couple of exceptions such as in case of the beneficiary passes away or gets a scholarship) you would have to pay regular taxes plus a 10% penalty on the earnings. Also, in some states where you have taken a deduction for the contributions, they may have a tax recapture.

[ecoadapt]

Oh, good to know! I thought 529's were for all education, too.

I also thought it's only for education but knowing it isn't oh well.. that would be a relief!

[Like2Plan]

I also thought it's only for education but knowing it isn't oh well.. that would be a relief!

Just to clarify, unless tax code is changed 529's are only for college and other post-secondary training otherwise you pay taxes and penalties on the earnings (and possible tax recapture if you took a state deduction).

[wikiwiki]

Regarding 529s... we haven't started them for oue 3 kids, just regular savings accounts. The reason is that I read they can only be used for colleges in the USA. Is that still true? We are dual-citizens of Australia and want our kids to have the option of going to college in Australia. If their $ is tied up in a 529 then they cannot use that for an Australian college, correct? What is the best alternative?