Oldest son received UTMA in the form of stock from my mother before she died. This was before 529 accounts existed and it was intended for college. When he was almost 18, I realized it would be his free and clear at 18 and he was at that point not mature enough to handle that money and save it for college and he was entering the military. So I rolled most of it into a UTMA 529 account for him and left a small amount in the stock, which he then, as expected, sold once he was 18.
Fast forward, he's now almost 27, out of the military and has the GI benefits as well as some regular 529 account money my husband and i contributed to once those were a thing. He's Ok'd me changing the beneficiary on the regular 529 to his sister who is currently in college and could use the extra tuition help. But I would like him to have the UTMA money to spend on a car which he desperately needs, and maybe put some of it into a Roth IRA if possible. If he cashes this out, he will owe fed and state income taxes on the increase in value since I put it in there 9 years ago, right? Is there another penalty on top of that, for using it for non-education purposes?
Any other complications I'm not considering?