[USER]

Deceased husband left around 30K in a 529 to my step kids who are now 24 years of age. Since the kids didn’t use it for their education, she had checks cut in their names.

We are now subject to 10% penalty and state taxes…what’s the best thing to do with the money if it’s not going to be used immediately?

Thanks in advance.

[Michelle]

If its not too late I’d switch to rolling it over to Roths for them. If you haven’t cashed the checks I think it can be redeposited in the 529s.

The rollover has to be direct from the 529 to the brokerage with the IRA.

You can’t be issued a check and deposit it into the IRA yourself.

[Christopher]

Set aside the tax liability portion as cash. Rolling to an ira would’ve been ideal.

Otherwise it’s just money now, so just deploy it as you would any other money.

[Helene]

WHO had checks cut? On whose instructions?
If money manager did it without the account owner’s written consent, she should be fired and a complaint filed against her license.

I finished my BA at age 29. Attended law school in my mid 30s. It’s not uncommon to leave it in place.

Check with a legitimate source (CPA) as to the timing and whether the funds can be put back to avoid the penalty and preserve the investment.

[Enilda]

Roth IRA if it wasn’t already distributed. If kid have jobs, the best place for the money is a Roth IRA.

[Carrie]

I would just set aside the 10% taxes and use the funds as any other at this point in their lives.

Most likely they could use it towards an emergency fund for them selves or to pay for other milestones in their lives.

[Mwikali]

Roll it over to ROTH 401k if the 529’s have been open for more than 15years.

[Author]

Posts