Withdrawal Rules:
As previously mentioned, IRA withdrawals before age 59 1/2 may be subject to income tax and a 10% penalty. The 10% penalty is waived for qualified higher education costs, but any withdrawals of previously untaxed money are still subject to income tax.
Treatment of Unused Funds:
Unused funds remain the property of the parents for as long as they choose. However, Traditional IRA’s (not Roth IRA’s) are subject to Required Minimum Distributions starting at age 70 1/2.
