If your child doesn't go to college or doesn't need all the 529 funds, perhaps due to scholarships, you have a few options for using your investment. One is to transfer or roll over the 529 account to a new beneficiary. In order for the rollover to be federal tax-free, the new beneficiary must be a member of the original beneficiary's family, such as siblings (including stepsiblings), parents, spouse, children, first cousins, nieces and nephews, and the new beneficiary cannot be in a lower generation than the original beneficiary. You can also name yourself as a beneficiary (assuming you are a family member of the original beneficiary and are in the same generation or an older generation) and use the funds for your own education or training, either in your current career or to begin a new one. This strategy isn't possible, however, for custodial 529 plans — as that beneficiary designation is irrevocable. Qualified individuals can also roll over a 529 into an ABLE account (a tax-advantaged savings account that benefits those who are disabled), subject to ABLE annual contribution limits.
There aren't any distribution deadlines on 529 account assets, so assets can remain in an account to be used later, for example, to fund the beneficiary's qualified expenses for graduate or other schooling.
You may also close the account and take a non-qualified withdrawal. In that case, federal income taxes, state and local income taxes, and the potential additional 10% federal tax on the earnings portion of the withdrawal will apply.
If your child receives a tax-free scholarship, fellowship grant or attends a U.S. military academy, you may withdraw an amount equal to the scholarship/grant (or the costs of advanced education attributable to attendance at the military academy) from the 529 account without having to pay the 10% additional federal tax; you will owe only the federal ordinary income taxes on the earnings portion of the withdrawal. State and local income taxes may also apply. The 10% additional tax also does not apply if the beneficiary dies or becomes disabled.