What happens to higher education trust fund money that isn't used?

Paying for College
1

<p>My son (rising junior) has been offered a two year ROTC full scholarship that he will probably accept. My parents and myself both have some money in higher education funds for all three of the kids that we have been doling out slowly. What happens to the money put up for him if he doesn't need it? Can some be used to pay off his loans? Can the rest be transfered to the other kids? And if it can't, what happens to it? He isn't planning on more school after college?</p>

<p>I never thought this was a problem we would have...</p>

2

<p>What kind of higher education funds? 529 Pans?</p>

3

<p>yes, 529s</p>

4

<p>The money can be rolled into his siblings 529’s. If the “loans” are for education the 529 can be used. You can also take it out but will have a tax penaltyn </p>

5

<p>See <a href=“http://webcache.googleusercontent.com/search?q=cache:yWw_v6EzxZ0J:www.savingforcollege.com/questions-answers/article.php%3Farticle_id%3D137+&cd=1&hl=en&ct=clnk&gl=us[quote]If”>http://webcache.googleusercontent.com/search?q=cache:yWw_v6EzxZ0J:www.savingforcollege.com/questions-answers/article.php%3Farticle_id%3D137+&cd=1&hl=en&ct=clnk&gl=us

</p>

6

<p>why would he have loans if he has unused funds??</p>

7

<p>Room and board is still a cost. ROTC scholarships do not pay for that.</p>

8

<p>Uh, yes, but then you can use the 529 funds to pay that. Which is why Mom2 is asking the question. </p>

9

<p>Not sure 529 are considered “trust funds” (I was thinking grandma’s $$ kinda thing) but that said, yes, 529 savings plan funds can be used for a variety of education-related expenses (computers, printers and peripherals, housing for college, supplies. <a href=“http://www.irs.gov/uac/529-Plans:-Questions-and-Answers”>http://www.irs.gov/uac/529-Plans:-Questions-and-Answers&lt;/a&gt;&lt;/p&gt;

10

<br>

<br>

<p>think so, but dont know what all the rules are. however, if the money goes to siblings and he has loans, I think it is fair if those loans should get paid for in some way…even if you pay for them in lieu of paying out of pocket for the other kids. </p>

11

<p>

</p>

<p>529 accounts are not “trust funds” under the common understanding of that term. Also, computers, printers and peripherals are not considered qualified education expenses for 529 purposes unless they are required for enrollment or attendance at an eligible institution.</p>

12

<p>To be tax free, distributions from a 529 must be taken in the same tax year that the expenses are incurred. So you can’t use a 529 distribution in a subsequent year to pay off loans that paid for qualified expenses in a prior tax year.</p>

13

<p>@annoyingdad is correct.</p>

<p>Also, the beneficiary of the account can be changed to a sibling or even held in that account and then ultimately changed to a member of the next generation.</p>