529 Options When Not Used By The Beneficiary

In this episode of Berry’s Bites, Chris Berry answers the question: What happens when 529 is not used by the beneficiary for education?

Estate Attorney and Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm. Register via this link or give our office a call at 844-885-4200.

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Episode Transcript:

529 that has to be used for education. What happens if that child doesn’t use it for education? 529 that has to be used for education it grows tax-free so that part’s kind of cool. But you just have to use it for education so a question that came in is what happens if that child doesn’t use it for education easiest thing to do is you just change beneficiaries so find someone else in your family who you want to leave it to in the past.

What people would do is okay let’s say you put in this 529 your kid doesn’t go to college you’re retired but now you want to take cooking classes or auto racing classes with Mario Andretti and stuff like that you used to be able to use 529s for all kinds of like crazy things like that you want to take skydiving courses or become a pilot as the adult you could use it for a wide range of things.

But a number of years ago they kind of tightened it up what 529s could be used for but the easiest thing is just changing beneficiaries so if you have three kids really technically you only need one 529 and then if the oldest uses a portion that’s great if the second doesn’t use any that’s fine and then the third you could change the beneficiary to list the third kid it can go to certain restrictions on who you can transfer it to which I don’t remember off the top my head I want to say you can do it to cousins but that might be as far as you can change the beneficiary.

So yeah you can change it to someone in the family also you can just take the money out so it’s not like the money’s locked up but you would have to pay some penalties on that so that would be the worst-case scenario is you just take the money out and pay some penalties. Thank you.

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