I think that money in a 529 plan can be diverted to other purposes, if the child in question doesn’t attend college. For his brother’s college expenses, for example.
My son has high-functioning autism and is (trying not to hyperventilate here) going to college in 8 days. So it can work out :).
But, what we did planning-wise, early on, was establish a “special needs trust”. This is a trust fund whose terms are specifically set up to hold assets for the child, in such a way that they don’t invalidate the child’s access to things like disability income from Social Security (there are means tests for that, the person can’t own more than a couple thousand in assets). Ours is set up so that the money can be used to benefit the child in any way the trustee sees fit. As in, college, housing, car (the trust would own the car), or whatever.
My brother has 2 special-needs kids and has trusts set up at least for the older one; it will ultimately be funded by a second-to-die policy the parents have taken out (cheaper than 2 individual policies, I think). In our case, we don’t have the second-to-die policy, but we do have individual policies which list the trust as their second beneficiary (primary being the spouse).
While we drew up the trust paperwork years ago (when we did our wills), we didn’t expect to fund them prior to our deaths, however a relative made cash gifts to all family members and the money for the kids, we had put to the trusts instead.
We also had set up, prior to Dweezil’s diagnosis, a regular mutual fund account (not in a 529 plan, they either were new then or we didn’t know about them). That’s been largely liquidated to pay for his freshman year in college.
The disadvantages of setting up a trust are: not tax-advantaged, you have to have someone be the trustee (my brother-in-law, with my brother as secondary), the paperwork should be drawn up or at least vetted by a lawyer, the trustee has to handle tax returns every year, etc. So, while it’s a good choice for many situations, it’s not the easiest option.
This reminds me: I keep meaning to dig up our wills and trusts, and scan then. If I remember to do that, I’ll try to post the special-needs trust info somewhere where people can see it; I’ve had a number of people who were interested in what one looked like. Ours is set up to be liquidatable (turned over to Dweezil for use as he sees fit) pending some specific conditions; if memory serves, he has to be self-supporting for 2+ years, and living on his own or with a spouse).
Another idea: put the money in an account of your own, then draw on it when needed. Of course, this isn’t tax-advantaged either (unless you put it in something like a Roth IRA), and it would be subject to your own financial twists of fate (lawsuits, bankruptcy, other things for which your own assets were at risk).
