McCaleb Wealth Management

🎓 Attention parents with multiple 529 accounts!

We recently encountered a situation that serves as an important lesson:

A parent used funds from their daughter's 529 to pay for their son's college expenses, assuming the accounts were interchangeable. However, the daughter's account was overfunded, while the son's was underfunded.

The result? The withdrawal was treated as a non-qualified distribution!

🔑 Key takeaway: While you can transfer funds between 529 accounts or change beneficiaries, consider working with a financial professional who understands 529 plans and can help navigate these complex rules. 🎓



A 529 plan is a tax-advantaged college savings plan. Before choosing a plan, it's important to consider not only the state tax treatment but also any associated fees and expenses. Availability of a state tax deduction will depend on your state of residence, as state tax laws and treatment may vary from federal tax laws. And as this parent learned, if you make non-qualified distributions, earnings will be subject to income tax and a 10% federal penalty tax. If you have more questions, a tax, legal, or accounting professional may be able to provide you with some real-life advice.