My son earned numerous scholarships and is about to start his 2nd year of college, full time. He has a guaranteed scholarship that grows each year from his university, an honors scholarship and two private scholarships. We have Coverdell money and 529 money saved. We were advised to spend his Coverdell money first. We withdrew Coverdell money last year that covered some tuition and all of his room/board. This year, his scholarships will cover more than his tuition. We will have most of the 529 money ($24,000 - of which only $4200 is earnings) left over if we continue to spend his Coverdell and he continues to receive the guaranteed amount.
Do I have to withdraw scholarship money from a 529 in the year the scholarships were granted, or can I wait and withdraw a cumulative amount his senior year. I have searched for this information and cannot find an answer on any site, IRS or otherwise.