ESOP Financial Advice-Alternative Investment

[Todd Shaw]

I am in a ESOP at my work.  The company just sold and I have to figure out what to do with the money.  75% has to stay invested in company 401k with annual disbursements for 5 years.  I likely will keep the 75% invested for retirement.

There is 25% I have to figure out what to do with.  I would like to take this out.  I face big penalties but it would be very helpful in paying bills and helping with kids college.   My question is there a way (tax shelter) to reduce the penalty/tax?  

While most/all advisers want me to roll it into an IRA. I ideally am looking to-

Pay down some debt which would increase my available cash on a on-going basis.

Do some home improvements which would increase the value of my biggest asset as well as fix it up.

Set money aside for kids college.

Invest in something that would bring in some additional income.  A vacation rental is one thing I am considering.  This would give me revenue and another large asset.

I realize the penalty sucks but with the above plan I am looking to make life better now as well has the future while paying for my kids school.  

Is there a way to minimize my penalty or tax.  Does the plan above seem wise or am I completely off base?