@curiousme2 , when one is dealing with family, when one is looking at what is likely, even possible to become a protracted issue with bad feelings all around, those things need to be taken into situation. When a parent remarries, it changes things all around. The financial picture, particularly inheritances, unless covered by a well designed prenup can change altogether.
You are fortunate in that you are able and willing to support your children with college and that you were not counting on your father’s financial assistance. Given the info you have shared, he was not likely to be able to be of much financial assistance to your family anyways. In fact, in such scenarios, ones parents end up wanting/needing financial assistance from their offspring.
Family gets complicated anyways. I’ve seen fraud committed, crimes committed in assets stolen, etc within family, and the fallout of pursuing a lot of those incidents just not worth the stress of process and consequences. Those things should be taken well into consideration. There are great advantages to taking the high road.
I wish you the best in handling this, and your children’s college years. I’m glad you have the outlook you are showing.
I believe that just because he lives in a different state now that the state where the 529 originated in will still want their money if a tax break was given. But then again, not your problem.
The 529 is from VA, a state my father has never lived in. I forget why the advisor chose VA, but there was a reason why that fund was better than my parent’s home state 529 plan.
I decided in the name of due diligence to reach out to our CPA and ask about the tax implications for both scenarios (Dad empties fund for himself, Dad sells me the fund for $10k) so at least I can advise him. Not that he will listen to me, but at least I will know I tried. Someone a few posts back had a good point, there’s no way my father is consulting a CPA considering the financial ruin he’s gotten himself into.
The 1099Q he will get the year following the distribution will show the split between earnings and contributions. The earnings are to be reported as income on the 1040–you can google 1099Q and get specifics. Those earnings are added to income and get hit with With a 10% penalty tax on them. Most states take federal 1040 info and adjust as they see fit, so likely there will be additional state tax too. Depends upon your dad’s tax bracket as to what the dollar amount of the taxes will be. Also how much in earnings, which could depend upon the market value of the accounts when liquidated. So it’s not necessarily an easy estimate of how much of a savings it will be to pay the education expenses from the plan or turn over ownership of the 529 to you. Also, depending upon the rules of that 529, and the timing of when it gets turned over to you could be issues.