Restricted Use of Plan Assets

What this video covers

• Why non-qualified 529 withdrawals trigger ordinary income tax plus a 10% penalty on earnings only, while contributions always return tax-free
• The four exceptions that waive the 10% penalty: scholarship, military academy attendance, death, and disability
• Why the scholarship exception removes the penalty but never removes the ordinary income tax on 529 earnings
• How a tax-free scholarship and a 529 withdrawal are two separate pots of money that do not cancel out
• Why attending an out-of-state school is not an exception for 529 savings plans, and how prepaid tuition plans differ on value versus tax treatment
• The SECURE 2.0 rollover to a Roth Individual Retirement Account (Roth IRA): 15-year account age, 5-year contribution seasoning, and $35,000 lifetime cap
• Why the Roth IRA rollover must be a direct trustee-to-trustee transfer into the beneficiary's account, and how it bypasses normal Roth income limits