Multiple options exist for clients who have unused 529 plan funds, according to advisors.
Clients may be in that position, for example, if they started a 529 plan for a child who decided not to go to college after all. But these are not stranded assets, noted advisors, who say there are plenty of options for making use of the money.
Jim Sandager, senior vice president for Wealth Enhancement Group in Des Moines, Iowa, offered the following options:
-The funds are not limited to traditional colleges. Sandager noted 529s can be used for trade schools or any qualified educational institution.
-Save the funds for a younger child in the family. Clients can transfer a 529 plan to another member of the family, such as another child, a grandchild, a step-parent, a step-child, an in-law, a sibling or a niece or nephew.
-The clients can use the funds for their own education. If a client wants to learn a new trade or obtain another degree, they can make themselves the beneficiary. Sandager suggests clients get a 529 in the state they reside in so they benefit from state tax advantages. However, some states don’t offer tax credits for 529 contributions, including California, Delaware, Hawaii, Kentucky, Massachusetts, Minnesota, New Jersey, North Carolina and Tennessee.
-Give it to a yet-to-be-born child, says Sandager. A parent or grandparent can change the beneficiary to a child that was born after the account was created.
Use it for the primary and secondary education of a younger child. The recent tax rewrite allows 529 savings funds to be used for K-12 tuition at a parochial or private school, and a client can use the funds towards other education-related costs like internet service.
Ronya Corey, the managing director and wealth management advisor at Merrill Lynch in Washington, D.C., reviews her clients 529 on an annual basis to keep track of where the client's child will go for college.
"That should be regular part of an advisor's process," says Corey. "Talk about, not only the regular goals, but also the subsets."
Corey had these tips: