My grandchild just graduated from college and does not plan to attend graduate school. There are no other family members that need the funds in the 529 savings plan. What happens now?

There is no time limit for keeping funds in the 529 plan. It may make sense to do nothing now because things can change. Your grandchild may go to graduate school or have a child of his own who can be named as beneficiary of the account. If you set up the account and now want to close it, the income earned on your contributions will be taxed to you for federal income tax purposes. In addition, there is a 10% penalty on the income withdrawn. (Some of the principal in addition to the income may be taxed for state income tax purposes if the state allowed you a tax deduction for your contributions.) If you don’t want to pay the tax, you can ask the plan administrator to pay the distribution to the beneficiary. If the plan administrator won’t do this, roll over the funds to another 529 plan that will.