For years, we’ve helped doctors with strategies to fund their children’s educational costs with tax-deductible dollars for huge savings. But what happens if your children end up with excess funds in a Section 529 College Savings Plan after their education is completed? Below, we discuss the most tax-savvy options.

Recently, a long-time Tax and Business Planning client contacted us with an interesting dilemma. His daughter had just graduated from college with $172,000 left in her Section 529 college plan. While her two younger siblings were still in college, their college costs were fully funded. What should be done with these excess funds to achieve the best tax and economic results for the family?

First, a quick primer on how Section 529 College Savings Plans work. Contributions made into a 529 plan for a child, grandchild, or other relative are not tax-deductible for federal income tax purposes. However, the earnings grow tax-free and distributions are tax-free if used for qualified educational expenses. Otherwise, if distributions are made for non-educational purposes, the earnings (but not the principal) are subject to federal