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I don't think I had a single thought about anything other than the numbers related to paying from a taxable vs. tax deferred-free account and the process to do it to make sure we don't do something wrong related to tax exemption of the money.
This is a legitimate concern. A few days ago I posted the following link to an article that discusses some of the issues. It's worth a read in my estimation, even though it does not answer your questions conclusively. It seems like you will need to speak with someone who knows the 529 rules for the applicable state.
Thanks! Not do it? What is your thinking? The interrelationship issues people brought up before? Yes, part of this was I didn't really want to bother my accountant with this since from what I found, on a numbers basis, it doesn;t make sense to use the 529 to pay for something now? Hmmmm, is this another analogy?! If it was my daughter that wanted to go for an advanced degree now. Would / should we use the 529 to pay for it?!
And maybe another analogy - you retire. Do you start drawing down your Roth IRA first? Or use up (yeah, keep some for emergencies) your taxable account money first?!
I did pay off my daughter's husband student loan so they could qualify to buy a house as she would not be working in Houston, Texas. They had a 19-month old at that time. Fast forward 25 years later. He divorces her out of the blue and by golly, I would like to have had that money to give to her now. Screw him. I think if you have the money, just keep it as you can never tell when your own flesh and blood might need it for good reason. In-law children are just that and they can sure enough become out-laws a few children and years later.
My son is getting married next year and my future son-in-law is finishing up a degree (going to school as a veteran, doesn't have any student debt yet, but changed majors and will need to take out a loan to finish). I think his benefits end next month, and he doesn't finish till March of next year.
They are getting married in May, two months after my future son-in-law graduates. I will check with DS first, but I may want to offer to pay off my future son-in-law's loan if he takes one out. It will be less than 10K. I can't do that, though, of course until after they are married. It would be helpful to them just starting out and wanting to buy a home, etc.
In my case though, it's a smaller amount, but I have about 60K in a 529 with my son currently as the beneficiary and in my case it's very likely that eventually monies will come out with a 10% penalty and needing to pay back tax credits to the state of Missouri. OP -- I certainly don't have the dynasty situation you have. I just have one child. All my nieces and nephews have finished their educations and are teachers whose student loans the government will forgive. My son doesn't make a lot of money and I'm not expecting my son-in-law will be making much money. I will be able to use 35K of that 60,000 -- just 6,500 a year starting in 2024 to fund DS's Roth for five years or so. This is a new option that goes into place in 2024 for a 529 plan that has been open for more than 15 years.
My son is 27. His boyfriend is 30. I don't expect my son to do any more schooling. They as of now at least aren't expecting to have / adopt any children. And adoption is super expensive too. I know a gay couple who recently adopted a little girl three years ago (son of a good friend), and it took them 5 year and about 80K.
Anyway, given the tax penalties and back taxes that I would have to pay, helping out with a loan that would most likely be very much appreciated for this wonderful couple just starting out seems like a very reasonable thing for me to do.
As time goes on there may be more things I can do 529 monies as laws evolve and change.
For me it's a smaller amount of money and no dynasty, Plus back taxes, taxes, and penalties really eat up a lot of the funds making me much more inclined to use the money for qualified purposes if I can.
I really like my future son-in-law, think it's highly likely they will have a very successful marriage, etc. but I do get other posters thinking about doing stuff for your own and not necessarily their spouses (e.g. -- fund a Roth for my son, but not my son's husband, etc.) In my case though (a small loan) or in OP your case (10K) a small amount in the grand scheme of things given how much you've got in it, me I'd probably do it. But maybe not if you have all kinds of grandkids, etc. expect lots of great grandchildren.
Your daughter might just be like me -- thinking of the 529 as family money and keeping up on all the laws about how the monies can be used and wanting to use it qualified purposes when they arise vs. using other monies.
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