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What happens if I open an education savings plan for a child who doesn’t end up going to college?

Two common types of education savings accounts are Coverdell Education Savings Accounts and 529 college savings plans.  Money in a 529 can be used for qualifying accredited post-secondary education expenses with no age limitation.

If the funds won’t be used for educational expenses of the named child, you‘ll have two basic options:

  1. The account can be re-designated to another family member without tax consequences, including to:
    • Other children in the family, including stepchildren
    • Grandchildren
    • Parents and stepparents
    • Nieces and nephews
    • First cousins
    • Aunts and uncles
    • Spouse of the designated beneficiary
    • Spouse of any of the above


  2. The account can be closed any time, with the balance distributed for non-educational expenses. The earnings will be taxed as income at the time of distribution and a mandatory 10 percent federal tax penalty will be imposed. The penalty is waived in the event of the death or disability of the beneficiary, or if the beneficiary receives a scholarship.

This is not a complete description. Contact a COUNTRY Financial representative about important differences, retrictions, limitations, etc.