Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I’m pretty confident that my DC will go to college, and we won’t qualify for aid. Given that, we are funding enough to cover 90-100% of in-state tuition and we will come out of pocket for anything other than that. I’m not at all worried about wasting these dollars.

OP here,

I've got enough put away for about 6 years of in-state tuition and room and board for each kids. I've told my oldest that he has a budget of $X total, and he's found some schools, a couple safeties and a couple matches where the NPCs say he could get the degrees he currently wants debt free. The ones he likes best would come in at the top of budget, and would probably require him to get a job and earn his own spending money, but that's fine. That is what this money is intended for.

But now, as he's getting ready to apply, he's realizing that there are programs where his stats will give him huge amounts of automatic merit, and where he would be able graduate with significant savings. These schools aren't as good a fit in other ways, but they aren't bad schools, just not exactly what he has been saying he wants in terms of size, location, extracurriculars, other subjects he wants to study on the side etc . . . So, he's asking "What happens to that money if I don't use it?" It's a good question so I'm trying to sort out how to answer it.

Kid sounds awful TBH.

Anonymous wrote:For those with high assets, saving 529 for grandkids could end up involving a heck of a lot of tax-free growth.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Move whatever I can to Roth IRAs for them and leave the rest in the 529 for them to use for any future grandkids.

This exactly.

+2

OP, if it were my son I would tell him that the money would be available to him for grad school if he doesn't use it all, and to fund his Roth the first several years he is working. But I would not tell him he could cash the whole thing out as some kind of incentive bonus to go to a cheaper school - it's my money that I've saved, earmarked for education. Not his money that he can spend on either an expensive school or a cheap school and a car, for example.

Anonymous wrote:

Anonymous wrote:I’m pretty confident that my DC will go to college, and we won’t qualify for aid. Given that, we are funding enough to cover 90-100% of in-state tuition and we will come out of pocket for anything other than that. I’m not at all worried about wasting these dollars.

OP here,

I've got enough put away for about 6 years of in-state tuition and room and board for each kids. I've told my oldest that he has a budget of $X total, and he's found some schools, a couple safeties and a couple matches where the NPCs say he could get the degrees he currently wants debt free. The ones he likes best would come in at the top of budget, and would probably require him to get a job and earn his own spending money, but that's fine. That is what this money is intended for.

But now, as he's getting ready to apply, he's realizing that there are programs where his stats will give him huge amounts of automatic merit, and where he would be able graduate with significant savings. These schools aren't as good a fit in other ways, but they aren't bad schools, just not exactly what he has been saying he wants in terms of size, location, extracurriculars, other subjects he wants to study on the side etc . . . So, he's asking "What happens to that money if I don't use it?" It's a good question so I'm trying to sort out how to answer it.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I gave it to my kid and told them to save it for grad school but if they didn’t go to grad school they could use it for a downpayment or something (didn’t want to leave it in the 529 in case they didn’t go to grad school).

So you paid the withdrawal tax on it? Or, did you cheat on your taxes? Curious.

For reasons not worth explaining we ended up paying out of other funds so we neither paid the tax nor cheated on our taxes as there is no requirement that the exact dollars used for tuition be traceable to the 529.

Basically we felt that we didn’t need those funds for retirement or other siblings but also we weren’t sure we’d be able to contribute more to grad school so we decided it was better to give the funds now with the understanding that it was all they could expect to get to fund grad school.

What this person did is literally fraud. You can’t just take the money back out of a 529 and give it to the kid. Legally the money you have saved tax-free in a 529 account must go toward educational expenses. Otherwise you must pay a significant tax penalty. If this were allowed then lots of people would be using 529s as a way to get around paying taxes on capital gains.

If you have $25k in qualified educational expenses and you get a check for $25k from the 529 the IRS isn’t going to check if there were other deposits and withdrawals to your checking account between when you got the 529 check and paid the tuition bill.

Everyone (well apparently except you) understands that money is fungible and the limit on abusing 529s is having qualified educational expenses— not proving that the exact same dollar bills are traceable from the 529 to the college.

Anonymous wrote:Not leaving it for “future grand kids” when I have no idea if my kid will have any.

Anonymous wrote:

Anonymous wrote:I’m pretty confident that my DC will go to college, and we won’t qualify for aid. Given that, we are funding enough to cover 90-100% of in-state tuition and we will come out of pocket for anything other than that. I’m not at all worried about wasting these dollars.

OP here,

I've got enough put away for about 6 years of in-state tuition and room and board for each kids. I've told my oldest that he has a budget of $X total, and he's found some schools, a couple safeties and a couple matches where the NPCs say he could get the degrees he currently wants debt free. The ones he likes best would come in at the top of budget, and would probably require him to get a job and earn his own spending money, but that's fine. That is what this money is intended for.

But now, as he's getting ready to apply, he's realizing that there are programs where his stats will give him huge amounts of automatic merit, and where he would be able graduate with significant savings. These schools aren't as good a fit in other ways, but they aren't bad schools, just not exactly what he has been saying he wants in terms of size, location, extracurriculars, other subjects he wants to study on the side etc . . . So, he's asking "What happens to that money if I don't use it?" It's a good question so I'm trying to sort out how to answer it.

Anonymous wrote:

Anonymous wrote:I’m pretty confident that my DC will go to college, and we won’t qualify for aid. Given that, we are funding enough to cover 90-100% of in-state tuition and we will come out of pocket for anything other than that. I’m not at all worried about wasting these dollars.

OP here,

I've got enough put away for about 6 years of in-state tuition and room and board for each kids. I've told my oldest that he has a budget of $X total, and he's found some schools, a couple safeties and a couple matches where the NPCs say he could get the degrees he currently wants debt free. The ones he likes best would come in at the top of budget, and would probably require him to get a job and earn his own spending money, but that's fine. That is what this money is intended for.

But now, as he's getting ready to apply, he's realizing that there are programs where his stats will give him huge amounts of automatic merit, and where he would be able graduate with significant savings. These schools aren't as good a fit in other ways, but they aren't bad schools, just not exactly what he has been saying he wants in terms of size, location, extracurriculars, other subjects he wants to study on the side etc . . . So, he's asking "What happens to that money if I don't use it?" It's a good question so I'm trying to sort out how to answer it.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I gave it to my kid and told them to save it for grad school but if they didn’t go to grad school they could use it for a downpayment or something (didn’t want to leave it in the 529 in case they didn’t go to grad school).

So you paid the withdrawal tax on it? Or, did you cheat on your taxes? Curious.

For reasons not worth explaining we ended up paying out of other funds so we neither paid the tax nor cheated on our taxes as there is no requirement that the exact dollars used for tuition be traceable to the 529.

Basically we felt that we didn’t need those funds for retirement or other siblings but also we weren’t sure we’d be able to contribute more to grad school so we decided it was better to give the funds now with the understanding that it was all they could expect to get to fund grad school.

What this person did is literally fraud. You can’t just take the money back out of a 529 and give it to the kid. Legally the money you have saved tax-free in a 529 account must go toward educational expenses. Otherwise you must pay a significant tax penalty. If this were allowed then lots of people would be using 529s as a way to get around paying taxes on capital gains.

If you have $25k in qualified educational expenses and you get a check for $25k from the 529 the IRS isn’t going to check if there were other deposits and withdrawals to your checking account between when you got the 529 check and paid the tuition bill.

Everyone (well apparently except you) understands that money is fungible and the limit on abusing 529s is having qualified educational expenses— not proving that the exact same dollar bills are traceable from the 529 to the college.

While I agree with you on this, it doesn't answer the question. The question is, if your kid's total qualified education expenses end up being significantly less than what's in their 529. If you had qualifying educational expenses that you used the 529 to pay for, even if you initially paid them another way, and then reimbursed yourself with the 529, that's a different thing.

I have told my kids that they need to work to provide their own spending money. If it looks like we won't use the 529 money, we can withdraw a reasonable amount for spending money, and give it to the kid. That would be legal, but it would only be a small portion of the 529.

How would you do that since spending money isn’t considered educational expense?

The rules for 529’s absolutely allow the funds to bused for living expenses, including rent, food, and reasonable amounts of spending money.

News to me but thanks. I was wondering from tax filing purposes how you would characterize that in your filing.

Anonymous wrote:

Anonymous wrote:Is it theirs to spend? With conditions or without?

Not really 529, but prepaid tuition for MD. Converting it into Roth for them. The reason is because they used merit scholarship for tuition. Which is their hard work. For us, the prepaid college tuition is a sunk cost. Our kids have come out of their college journey with a double major in STEM, no debt, wonderful paying internships each year, savings in the bank - etc, etc. No conditions on our kids. We have invested time, effort on their upbringing, and it is paying dividends. They are super smart, mentally healthy kids who hang out with others like them.