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I have a 529 account for my son. If he receives an athletic scholarship, how can I use the 529 for other purposes?


You can’t. The only purpose for a 529 account is paying for education expenses. But while the “how” doesn't change, the “who” can. If you have other children, you can use the money for their education, as long as you change the designated beneficiary of the account before that child or children enroll in college. If you have no other kids, then you can always keep the money in the account for use a generation later, if and when your son has a child to send to school. If your son gets his scholarship and you’d prefer to withdraw assets from the 529, there’s a bit of good news in case the scholarship isn't sufficiently glad tidings by itself: Any investment income withdrawn from a 529 has accrued tax free and so is subject to income tax, but the 10 percent penalty that otherwise would be assessed on top of that is waived if the reason for the withdrawal is that the account beneficiary receives a scholarship.

-Conrad de Aenlle