529 Plan non qualified withdrawal
I set up a 529 account for my grandson but he decided not to go to college. I would still like to give him the money. If the money is removed from the 529 account and sent directly to him, is he responsible for paying the income tax and 10% penalty on the earnings?
Terry Says
No, no no!!! There is now a way for him to covert those funds into a Roth IRA — if he has income, and if the funds were in the account for 5 years. Then the money can grow tax-free for his retirement. No hurry to do this, so maybe he will change his mind after a few years and still use the money for school.
Read this for details: https://www.fidelity.com/learning-center/personal-finance/529-rollover-to-roth
