Dave wrote:

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In some of the sponsor's writings, I find the words "account owner"
(you) and "student beneficiary". Since you, account owner can change the
beneficiary as you wish, it appears to me that once another donor has
made a gift to the 529, as long as they did not retain their own "owner"
status, you are then in control. (Which is why I've seen questions
regarding the ability to move money from a UTMA/UGMA to a 529. The
former is the minor's property, the latter, not quite theirs.
JOE

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be prorated by the 529 plan. They will give you a statement at the end
of every year to tell you how much you withdrew, how much was
principal, and how much was earnings. Its their problem to keep track,
not yours. And you can't try to claim that all your withdrawls were
earnings first, and everything left over was principal.

But it seems to me that for tax free compounding for several years, you
may still be better off with the taxes and penalties than if you tried
to grow it in a taxed account.

My main question is still can I use money from all those sources and it
legally becomes mine, the Participant?

Dave wrote:

- quote -

At the other end, you can change 'ownership' to your child, over 18, to
make the post-schooling final withdrawal, if that's your wish.

The 10% penalty and any tax are due on earnings only, so you should
track the deposits to the account as you would for an IRA whose deposits
were post-tax money.

Keep two things in mind:
1) You should try to target the dollars invested so the balance doesn't
exceed the cost of college by so much that the tax/penaly is huge.
2) The beneficiary can be changed, so even if you have one child, the
remaining money can be targeted to benefit the grandchild, if you don't
want it to go off your bloodline.

3) What I haven't found is this - say you deposit $100K over time, and
it grows to $250K. You then spend $150 on college, and have $100K left
in the account. Is the withdrawal a return of principal avoiding all tax
and penalty, or is it prorated, so 40% (100/250) is considered
principal? These two produce very different results.

JOE
JoeTaxpayer.com

I poked around here a bit, but I don't see this topic covered already.
My original question was how best to give the remainder of a 529 to the
beneficiary when they are done with college. I would like to close the
account and have everything go to the beneficiary. But the rules say
that its taxed as income to the Participant. So - is the right thing
to do here is change the beneficiary, then make the old beneficiary the
Participant, then let him close the account?

And that got me thinking more. I have five sources of income for this
account.
1. I can put my own money in.
2. Grandmother is going to put money in.
3. Child is going to put his own money in.
4. Cloverdell account is going to be closed and all assests moved
5. I, as trustee of the child's trust fund, am going to move a large
some of money from the trust.

Now, all of that seems like a good think to do to grow a college fund
as large as possible tax free; but am I correct in understanding that
as the Participant I now have the legal right to withdraw the money as
mine, just paying tax on the earnings?

And - is the 10% penalty just on the earnings portion of the
distribution, or on the whole distribution?

Thanks for your time.