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What Happens To A 529 When A Child Turns 18?

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You want to be responsible and open a 529 account to pay for your child’s college. But what if they turn 18 and decide to drain all the money you saved in the college savings plan on a down payment for a timeshare on Mars? 

What happens to a 529 when a child turns 18? The 529 college savings account belongs to the account owner, normally the parents or guardian. While there are always some exceptions, the parents or guardian need to give permission for any withdrawals from the account.

This means that, as long as you open the account as a normal 529, you don’t have to worry about that iffy Martian timeshare investment.

However, if you open these types of college savings plans in the child’s name instead of listing them as a designated beneficiary only, it becomes their money. Also, if you open the 529 as a custodial account, or transfer the funds from a custodial account, it actually becomes an irrevocable gift. 

And – because it is an irrevocable gift, it means they get control of the account once they hit legal age. As the new account holder, it is their money to do as they please. Once they become of legal age, all you can do is suggest they purchase a top floor, corner unit, Martian timeshare.

All right, now that we got that out of the way, let’s tackle a few more of your questions:

  • You might be wondering if you can continue to contribute after they turn 18 or after they have already started college. I’ve got you covered with the info in the next section.
  • Are you curious about the maximum amount you can contribute this year or when you can no longer contribute? Don’t worry, I’ll tell you this, too.
  • And before you ask, yes, I will cover when a 529 expires and what happens if your child gets a full scholarship or you just don’t use up all of the money in the 529 account.

If you were not able to save enough money to cover college expenses before the child becomes 18, it does not matter. You can continue making additional contributions.

In fact, if you are getting tax deductions from the contributions, continuing to do so can be a good idea. But, be aware of what happens if you build it up too much and don’t spend it all. 

We will get into that later on. 

Speaking of contributing to a 529 after the age of 18, you don’t have to open the account for a child or other family member. You can actually open it for YOU! You get to contribute to it and get the exact same benefits as you would if it was for a child.

You could use it to get a certification or advanced college degree to advance in your job. Or, you could save up to get training to get out of your current job (at either vocational schools or at a public college or a private college).

Another option would be to get training on something you might be interested in as a hobby. Learn to fix your own car or work on your heating and air conditioning system.

Read about how to build credit as a college student.

Can I Contribute To 529 After My Child Is In College?

So, just as I mentioned in the section above, the answer is yes – you can continue to the plan account after your child goes to college. There are no age limits on a 529 plan. One of the benefits of continuing to contribute may be getting state tax benefits.

In fact, if you didn’t meet your investment objectives before your child started college or you don’t think your current balance will cover their qualified higher education expenses, just keep contributing until it does. You can even continue contributing after they graduate.

Whoa, wait, why would you continue contributing if they graduated? I am glad you asked.

Perhaps your child decided that higher education is a worthwhile endeavor, especially if they are not the ones paying the college tuition. So, they have decided to continue on to graduate school.

Or, they’ve decided that a degree in their chosen field is not as useful as they had hoped and want to try another major. You can use the 529 bank account for both instances.

So it boils down to this – you can contribute to the 529 before, during, and even after your child is in college.

What Is The Max 529 Contribution For 2022?

Well, the good news is that the IRS has no annual cap for how much you contribute to a 529. If you want to contribute $20 million in this calendar year, you could.

But, not without consequences. While there are no actual contribution limits, anything that is contributed over $16,000 (in 2022) in a year is susceptible to a gift tax.

You probably don’t have to worry about that though, other than it being a bit of a hassle to fill out paperwork. See, if you go over the $16,000 limit, you will have to report the overage amount as a gift on your taxes.

Also, the $16,000 limit is based on each person giving the money. If there are 2 parents, each can give $16,000. Add in a couple of grandparents and the account balance could add up quickly.

If you do end up having to report an amount over the $16,000, it will probably just go against your total lifetime estate and gift tax exclusion. In 2022, that is just a little over $12 million (anything over that could cause a 40% tax). 

If you think you are close, or have gone over that, you need to talk to your tax advisor and your financial advisor instead of getting advice from the internet. Plus, I would like to ask if you would adopt me!

For the rest of us who aren’t in danger of exceeding the $16,000 contribution and incurring the penalty tax on a gift, each state sets its own limit on the maximum you can contribute. For example, Missouri, North Carolina, and Virginia allow you to contribute a total of $550,000 to the 529. This is a total contribution amount, NOT an annual amount.

On the other end, Georgia and Mississippi limit the total amount to $235,000. These amounts are total contribution limits, no matter how long the account is active.

If these amounts are just too low for you, you might find some relief in the fact that these are limits per child or beneficiary. You can put that amount in each of your children’s 529 investment plans.

Also, these are contribution limits, not limits on total growth of the account. If your contributions stay within limits but the account earns $50 million in investment returns, good for you!

When Can I No Longer Contribute To A 529 Plan?

If you are not afraid of tax fees and penalties, I suppose you could contribute to a 529 plan for as long as you are able. We discussed some of those above.

But, maybe that is the wrong question to be asking. When “can” you no longer contribute and when you “should” no longer contribute have two totally different answers. 

For example, what if your child has scholarship funds that will give them a full ride? In this case, you should put some serious thought into whether it would do any good to keep making contributions. 

Here are just a couple of things to ask yourself in this situation:

  • Is it a one semester scholarship or a 4 year scholarship?
  • What if something happens and they cannot fulfill any necessary scholarship requirements?

Here is another example to consider. Your child decides they do not need education after high school (my stepson did this). Then, continuing to contribute to the 529 may not make much sense at that point.

Or, perhaps another pandemic hits and your income has dropped, or stopped. This is a time that saving every penny is important and maybe 529 contributions don’t make the cut of needed expenses.

One other possibility is you have reached your, or your state’s, savings goal.

You may have decided you only want to save a certain amount of money and have reached that goal. Then, this would be an opportunity to stop contributing.

Or perhaps an older sibling has finished their education with money left over. You can transfer that 529 money to a new beneficiary (a younger sibling or a stepchild, for example) causing your goal to be reached.

You might meet the state’s maximum contribution limit and don’t want to incur fees and taxes by going over. This would definitely be a good time to stop contributing.

At What Age Do 529 Plans Expire?

Drum roll please….529 plans do not expire until you close them. After graduation, you could leave it alone in case the person decides they want more education later. The money will just sit there in open accounts, hopefully earning some type of interest.

The person might hit mid life and decide they want a change. They could use the 529 investment account to fund a new degree program.

Or, maybe when they retire they want to just take classes that sound interesting. The plan would still be there.

They may decide that for their 100th birthday they want to start taking classes. The plan would still be there and available.

Also along the lines of not expiring…If one child’s education is complete, as I mentioned in the prior section, you can transfer it to a sibling. If they do not use it all, it can be transferred to another sibling, or to a grandchild.

However, regardless of how long it is kept open, it will still only be used for qualified education expenses. Transferring to a retirement account or trying to use it to buy your first house would be a non-qualified withdrawal and will still wind up with you paying penalties.

What Happens If You Don’t Use Up Your 529?

So, let’s say your youngest child finally graduated. After all of the sacrifices and saving you dealt with, you now have a 529 account with money left in it. Just like the prior section stated, that left over money can only be used for qualified expenses for education purposes.

Unless of course you are willing to pay the taxes and penalty on the earnings. But we don’t want you to do that.

If you have read this whole article, you saw some of the things you can do with a 529. But, maybe you just jumped to this section because you thought it was the only one relevant to you.

You are probably right. So, I will re-touch on those and maybe a few other things you can do with left over 529 money.

For any scholarships that were received, an equal amount can be withdrawn penalty free. Unfortunately, that does not mean these are tax-free withdrawals. You will still be responsible for state and federal income taxes on the earnings.

Hmm, is there still money left over after accounting for scholarships? Then, you can transfer the money to another beneficiary. Perhaps an older sibling now wants to go back to school.

Depending on how late in life they graduated, the money could be transferred to their children. Maybe you can be the awesome grandparent that pays for their school.

If that doesn’t work, you can be really generous and transfer it to a favorite niece or nephew. What’s that, you’re not THAT generous?

Let’s go in the other direction then. How interested would one of the grandparents be to take a few classes? There may be some individual classes they would like to take just for fun.

If you are still reading, I guess you haven’t liked any of my ideas so far. Well, how about this next one?

Change the beneficiary to yourself! Are you looking for a midlife career change? Now is your chance. You can work toward your next degree to get your dream job.

How about taking just a few classes to get a certification? Maybe take classes for a hobby like photography. Or, take a class in basket weaving just to find out why people keep talking about it.

Are you still reading? Well, I only have one more option left, but you probably won’t like it.

Just cash out the account.

You will have to pay all of the state income tax, plus federal taxes, plus a 10% penalty on the earnings. But depending on your circumstances, maybe you feel that it is worth it.


Ok, wow, that was a lot of information. I appreciate that you stuck around for it all. Are you ready for the quiz? I’m kidding. But, I will review it for you…

We learned that when your child turns 18, they cannot take the money and buy a timeshare on Mars.

You can also continue contributing to the 529 plan after they turn 18 and even if they are still in college. 

The IRS does not put a limit on how much you can contribute. But the states do.

And, you can contribute to a 529 for as long as you want. Just don’t go over the state’s dollar limit. Why is that you ask? Because a 529 does not expire.

Finally, I covered some of the things you can do with money that is left over in a 529.

I have just one more bonus tip for you: before you sign up for a 529, make sure you do your research to find the best option for you. It may be a plan from another state, or something other than a 529 altogether (such as a Coverdell Education Savings Account or other investment options). Part of that research may include talking to a finance professional.

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