Excess 529 money - options

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Posts: 5381
Joined: Tue Mar 13, 2007 2:24 pm

Excess 529 money - options

Post by psteinx »

Have a few different possible excess 529 $$$ scenarios. Curious about options, especially in light of the new (as of Dec. 2022, IIUC) option to use 529 $ to fund Roths.

Scenario 1: Multi-generational scenario: G1 (my parents) have a small residual amount for a kid in G3 (their grandkid) that will not likely be used by her. She has one kid of her own now (G4), perhaps more later. Desire is to transfer out this residual from G1, but perhaps not directly to G3 - rather to my brother, G2, to watch over with target beneficiary as his grandkid (G4). So, this would be transferring ownership/balance from G1->G2, with current beneficiary in G3, but likely a change/ultimate beneficiary in G4. Possible?

Scenario 2: My wife and I have 529s for our 3 kids. Total balance projects now to be in excess of needs, at LEAST at the undergrad level, possibly inclusive of grad school (depending what paths are pursued). IIUC, one can now fully fund a Roth contribution, to the extent that the kid would otherwise be eligible to make one, from 529 money, so long as the account has been open 15+ years.


If the account has been open 15 years, but contributions were made to it including in more recent years (say, 2018), is that an issue?

Would the withdrawal, to contribute to a Roth, be deemed a "qualified withdrawal"?

Our state (Missouri), claws back some of the deduction originally taken for 529 contributions, if withdrawals are used for non-qual purposes. I presume/hope that using this Roth option would be qualified, and thus unlikely to trigger the clawback, right? (Might require some more state-specific research...)
Post Reply