What could be worse than the penalty is the fact that the earnings portion of a non-qualified withdrawal is generally taxed to you, the account owner, and not to the student. In addition, if you were able to deduct your original contributions on your state income tax return, you will probably have to report additional state recapture income. Assuming you are not questioning my grammar, the answer is that for almost every generality discussed you can find at least one state that does things differently. Some states do have age restrictions. Some states do not allow rollovers to any member of the family at any time.
Some states do give the beneficiary certain rights.
Some states do not allow you to be the beneficiary of your own account. While the law allows you to do those things without triggering tax, you should be careful about giving up the possibility of future tax-free treatment on those investments. The untaxed earnings rolled into the 529 plan will be subject to tax when withdrawn from the 529 plan down the road. I thought there were some gift and estate tax advantages with 529 plans, but you didn t mention that as a benefit. The gift and estate tax treatment of an investment in a 529 plan is a good news, bad news situation.