I saved too much for college. Now what?

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 Q. My youngest kid graduates from college this month, and we still have $30,000 in 529 Plans. None of the kids plan grad school. What should we do with the money?

A. Congrats to you for getting through those college bills.

Having extra money set aside for college isn’t the worst problem, but you do need to make some decisions about the account.

“You could take it out, but if it is not used for qualified higher-education expenses you will have to pay a 10 percent penalty on the earnings as well as federal, state, and local income taxes,” said Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown.

There are some other options that may be more palatable, she said, including paying for trade or vocational schools for yourself or family members, or you could even give the money to a different qualified family member to use for college. This includes you, your spouse, children, as well as nieces and nephews, first cousins, or daughter/son-in laws, she said.

That move is as simple as changing the beneficiary on the account, said John Zeltmann, a certified financial planner with RegentAtlantic Capital in Morristown.

“You are the owner of the account and you have the ability to reassign the beneficiary,” he said.

You can even hold the account for a not-yet-born grandchild, he said.

“I always like to say that 529 plans are terrific estate planning tools dressed up as very good college savings plans,” Zeltmann said. “While they certainly do a very good job of accomplishing their primary goal of providing tax-free growth towards savings for college expenses, they can also be used as tax-free savings vehicles across multiple generations.”

He said — as the old saying goes — the more time you give tax-deferral, the more powerful it becomes. So in your case, you could reassign the beneficiary designation to yourself, and once you have a grandchild, reassign the designation to said grandchild, he said.

“By doing this, you just took 529 savings that had a time horizon of possibly six to 12 months and extended it for at least another 18 years,” he said.

You also said you didn’t think your kids would go to grad school, but you never know. If your child changes his or her mind 10 years down the road, there is no deadline for these accounts, so if there are still funds in the 529, you can change the beneficiary again.

“Frequently people have reservations about funding 529 accounts because they wonder what happens to the money if it goes unused,” Zeltmann said. “Rest assured that this is a good problem to have and can in fact benefit not only you but also your children and future generations down the road.”

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This story was first posted in June 2015.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.