“Overfunded 529
College Savings Accounts”
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Funding a 529 college savings account can be a great idea.
But what happens if you overfund your 529 plan?
In this issue of the Tax Reduction Letter, I’ll provide you with flexible strategies that help solve a wide range of problems.
Scenario #1: What happens to unused funds when an account beneficiary decides to skip college.
Possible Solutions:
- Exercise Patience
- Change the account beneficiary.
- Take Advantage of the Broad Definition of Qualified Education Expenses
- Take Tax-Free Withdrawals for Your Education Expenses
- Drain the Account
Scenario #2: Account Was Used for Education Expenses but Overfunded
Possible Solutions:
- Change the account beneficiary.
- Drain the Account
- Do a Rollover into a Roth IRA
- Do a Rollover into an ABLE Account
Scenario #3: You need the money
Possible Solution:
- If you funded the 529 account with your own money, the account belongs to you, and you can take withdrawals for any reason you want! But, of course, there are stings.
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“Overfunded 529
College Savings Accounts”