-Keep the funds in the account just in case the client’s child or grandchild needs it later, said Corey. “It’s a great way to allow the funds to continue to grow,” she said.
-529s can be used for services related to special needs. Corey said 529 assets can be allocated towards special equipment a child may need to attend an institution of higher education. In addition, an existing account can be rolled into an ABLE account, according to Savingforcollege.com.
If a client wants to take the unused 529 funds to create a charitable fund or a scholarship, Corey said clients could get a tax benefit. However, be aware that the tax benefit may not offset the state and federal tax on the 529 plan’s earnings, she added.
For non-qualified withdrawals, a client would face a 10 percent tax along with federal and state tax on the earnings. The penalty tax may not apply if the beneficiary receives a scholarship or is disabled. Sandager and Corey believe clients should only take on the 10 percent penalty tax as a last resort.