Oh I am not saying I suspect my brother of doing anything underhanded with the 529; it’s just been a general frustration with how noncommunicative he is about, well, everything. And particularly anything that involves money and/or Dad. He doesn’t return phone calls basically ever and ignores emails for months at a time unless it suits his purposes. It’s been completely exasperating to deal with him.
Yeah, I am just going to deal with transferring the existing plan into one that I can manage and then figure out the next step (if any) after that. He may not be that into school, but he is smart enough to know that working at the local fast-food joint is not a life plan and he will need some kind of further education or training.
It really doesn’t because if he doesn’t end up using all the funds for qualified reasons then there will be taxes/penalties to be paid when it’s withdrawn - unless there is someone the funds can be transferred to. ( You can transfer to specified relatives - when my daughter finished school. I transferred what was left to my son, and when my granddaughter was born, I transferred what was left in my son’s account. When my grandson was born, I split the funds between him and his sister)
This is true, but with recent changes to the rules, unused funds from 529 plans can be rolled-over to a qualifying Roth IRA, without penalty, after 15 years have passed from when the 529 was opened. For my kids, that will be in a couple years, and the leftover fundage will be transferred to their long-term savings.
The OP should consider this if they are going to open a new 529 to transfer the money into - it will be 2039 before you could transfer any unused money over to your nephew (or yourself) without penalty. Perhaps there is a way to just get control over the existing fund - can your brother transfer ownership to you? That way you could manage the 529 without any of these other considerations. Note that you can still transfer to another family member as @doreen mentions at any time (not having to wait 15 years).
Do not move the plan out of NY without the advice of a competent tax advisor. It looks like at least two of the three plans NY operates explicitly treat moving the funds across state lines as a taxable event.
You can manage an NY plan with you named as the owner just as well as an IL plan.