WWYD

[sam_gordon]

Because these can be fun...

Backstory:
When DW's dad passed away, we ended up with a small inheritance. At the time, we split the money three ways equally and set up 529 plans for our three kids. The kids all know/knew we set up the accounts, but they never learned how much we put in or (to our knowledge) how much any of them built up to.
DD1 used all of hers on a bachelor's degree, still needed some student loans, but is teaching and is SUPPOSED to get some of the loans wiped off if she remains a teacher.
DS had four more years for his plan to increase, used all of his on a bachelor's degree, still needed some student loans. He graduates in May and is still looking for a "career" job.
DD2 had an additional two years for his plan to increase, used part of hers for an associates degree (finishes in March), and didn't need student loans. She has a part time job, with hopes to do Disney College Program next year and then who knows.

There is a not insignificant amount of money left in DD2's 529 plan.

So, the question is, what to do with DD2's left over money.
Basically, it can stay in the 529 in case she ever wants to go back for a Bachelors.
It can be transferred to a Roth.
We can change the name on the account to either of the other two.

I lean toward splitting the remainder three ways, DD1 & DS use the money to pay down their student loans (won't cover the entire amount, but will take a chunk out of it), DD2 chooses if she wants to hang onto it for future schooling or transfer to Roth. Our hesitation though is "is that fair to DD2 (to give 'her' money to her siblings)"?

Not a bad problem to have, wondering what others would do. And no, DW & I don't have enough money to help pay down the loans otherwise.

And please, no comments about whether they should have taken student loans or not. That doesn't matter at this point.

 

[soccerdad72]

My initial reaction would be that it's your daughter's money to decide what she wants to do with it.

 

[eticketplease]

I agree with @soccerdad72. We don’t know if she will want to go to school or later use it for her children.

Not that you can go back in time but instead of splitting the dollars equally I would have give oldest the most, the middle slightly less and the youngest the least. They would have all been around the same range but this would account for years of growth for the younger 2.

 

[TiggerTrigger]

So, we've had similar discussions.

If any of it is gift money...like funding given to them as baby gifts, grad gifts, etc., I feel like that can go to the child for which it was gifted. That being said, unlike a UGMA/UTMA, the 529 is not an irrevocable gift...so who the money actually belongs to is at the responsible individual's discretion. In light of that, I might reserve a bit extra (maybe even work out the percentages to help even things out with her siblings) but at least take a chunk to redistribute to the others to help pay down their loans. I know we intend to take that approach if DD17 gets anything substantial in both athletic and academic money, since DD19s academic scholarships and 529 are still not enough to cover it all.

 

[Imzadi]

My initial reaction would be that it's your daughter's money to decide what she wants to do with it.

Exactly, you initially split it equally three ways. Just because DD2 spent less on her education shouldn't mean she now gets less. As we all know Life can turn on a dime. Her current chosen profession may disappear do to AI or some other future advancement. She could use those funds for something else. Or some other life event happens, then she could use HER own money to deal with it.

 

[sam_gordon]

Exactly, you initially split it equally three ways. Just because DD2 spent less on her education shouldn't mean she now gets less. As we all know Life can turn on a dime. Her current chosen profession may disappear do to AI or some other future advancement. She could use those funds for something else. Or some other life event happens, then she could use HER own money to deal with it.

I never said she spent less. She ended up with more 529 money because she had longer to let it grow.

And no, you can't use the funds for something else. Needs to be education based or turned into a Roth account.

 

[kdonnel]

In hindsight I would have set up a single 529.

You can change the beneficiary an unlimited number of times in a year and used the one account to pay education expenses for all children.

I would change the beneficiary as needed and pay the student loans evenly.

I feel like the original intention was to pay for as much of the education expenses as possible for the grandchildren. You should continue with that intention and use it for all the grandchildren.

 

[TwoMisfits]

I'm gonna continue the "you split it 3 ways, leave it as is" chorus.

If you want to help your other 2 kids, find other money to gift them or loan them.

 

[china mom]

I can tell your what I did. My mother opened a 529 plan for DS when he was born and made me the beneficiary (which means that even though it was in his name, I had control and could re-allocate)

DS has no interest in college. DD has no 529 but is working on her AA and then hopes to transfer to a 4 years school (she is currently i the Disney College program).

Per our financial advisor, you can transfer $7k per year for up to five years ($35K from a 529 to a ROTH without penalty and DS can withdraw from the ROTH without penalty for a qualifying expense such as down payment on a house.

There was @$45K in the account so we opened a 529 for DD and transferred $10K to her and are moving DS's money into a ROTH.

We were transparent with DS but I think it went over his head. He didn't mind us splitting "his money" with his sister since I think he though that it could only be used for college anyway.

 

[kdonnel]

And to add.....

In my opinion you should NOT close the account.

Instead you should start contributing $25, $50, $100 a month, some amount of money you can afford, to the account and let it grow for 15-18 years.

Then you can be that grandparent in the future.

That is my hope for myself.

 

[soccerdad72]

I never said she spent less. She ended up with more 529 money because she had longer to let it grow.

It's a reasonable assumption, given that your other two kids got bachelor's degrees and your youngest got an associate's (which, I assume, was a 2 year degree). Obviously the youngest also had the benefit of more time for it to grow, but I would have also assumed she used less towards higher ed as well.

 

[sam_gordon]

In hindsight I would have set up a single 529.

You can change the beneficiary an unlimited number of times in a year and used the one account to pay education expenses for all children.

The only problem with that is not knowing how much to "leave" for the later kids. We could have paid off all of DD1 (so she didn't have any loans), but then DS & DD2 would have needed more loans than what they have now.

I would change the beneficiary as needed and pay the student loans evenly.

I feel like the original intention was to pay for as much of the education expenses as possible for the grandchildren. You should continue with that intention and use it for all the grandchildren.

That was the original intention, and they're the kids, not grandkids.

 

[Pea-n-Me]

I agree, I think it should stay with DD2 for her to decide what to do with it.

 

[sam_gordon]

It's a reasonable assumption, given that your other two kids got bachelor's degrees and your youngest got an associate's (which, I assume, was a 2 year degree). Obviously the youngest also had the benefit of more time for it to grow, but I would have also assumed she used less towards higher ed as well.

Definitely a reasonable assumption, but that associates degree was more expensive than I thought it would have been.

 

[soccerdad72]

Definitely a reasonable assumption, but that associates degree was more expensive than I thought it would have been.

Ouch - I guess I'm fortunate to live in an area with a good, affordable community college (that I may happen to work for )

 

[unrequited23]

I would hold off on deciding anything right now. Your youngest is barely in their early 20's. Later, if you wanted to even things out between the kids, I would subtract the amount remaining of the initial 529 for DD2, then divide what was left by 3 to transfer into a roth. The kids would be only splitting the investment growth. That seems roughly fair-ish to me.

 

[sam_gordon]

I would hold off on deciding anything right now. Your youngest is barely in their early 20's. Later, if you wanted to even things out between the kids, I would subtract the amount remaining of the initial 529 for DD2, then divide what was left by 3 to transfer into a roth. The kids would be only splitting the investment growth. That seems roughly fair-ish to me.

That's an interesting thought...

 

[sam_gordon]

Ouch - I guess I'm fortunate to live in an area with a good, affordable community college (that I may happen to work for )

I think the degree makes a difference too. It's not a "typical" CC degree (at least I don't think so).

 

[Mackenzie Click-Mickelson]

It's your daughter's money, sure you put it in to begin with but it was with the intent it be for her. There is no "what to do with the leftover money, should I split this with the other kids" Why is this even a question?

 

[kdonnel]

The only problem with that is not knowing how much to "leave" for the later kids. We could have paid off all of DD1 (so she didn't have any loans), but then DS & DD2 would have needed more loans than what they have now.

That was the original intention, and they're the kids, not grandkids.

So maybe the multiple accounts made it easier initially to ensure some level of fairness.

And I was referring to you continuing the account for the future grandkids that don't(?) exist yet. Maybe you already have grandkids, not sure. And the money came from the grandfather, so I was referring to our kids as the grandkids from his perspective.

I too had two 529 plans that were started with money initially from the in laws. Between the initial deposit, and monthly deposits my wife and I made for 15-18 years, my kids were lucky enough to graduate loan free.

I have kept one of the 529 plans open and have continued to make monthly deposits. My financial planner argued against it saying the money would be more flexible in my retirement accounts but the emotional side of knowing I was setting aside money specifically for the future grandkids education out weights the flexibility in my mind. He agreed as the money is still being saved.

I am long used to making the monthly deposit as I have been doing it for 18 years. Just have to continue it for another 18 years and will then have to figure out how to fairly distribute the money between the grandkid(s) or heirs if there are no grandkids.