What if my beneficiary receives a scholarship or attends a U.S. Military Academy?
You can withdraw funds up to the scholarship amount or the costs of an advanced education at a U.S. Military Academy (as determined by law) without paying applicable federal or California state penalty taxes. However, earnings (but not contributions) on the amount you withdraw will still be subject to applicable taxes, including federal and state income tax. You can also use your funds to pay for expenses not covered by the scholarship, such as certain room and board costs, books and other required supplies, or you may transfer the account to another beneficiary who is a member of the family.
