529 Change Beneficiary: Everything You Need to Know

What is a 529 Plan?

A 529 plan is a tax-advantaged savings plan designed to help families save for college expenses. Contributions to a 529 plan are made on an after-tax basis, but earnings grow tax-free and withdrawals are not taxed if used for qualified education expenses.

Who Can Change the Beneficiary of a 529 Plan?

The account owner of a 529 plan is the only person who can change the beneficiary. The account owner can change the beneficiary at any time, for any reason.

Why Would You Want to Change the Beneficiary of a 529 Plan?

There are several reasons why you might want to change the beneficiary of a 529 plan, including:

• The original beneficiary is no longer attending college.
• You have a new child who you want to add as a beneficiary.
• You want to change the beneficiary to a grandchild, niece, or nephew.
• You want to change the beneficiary to a trust.

How to Change the Beneficiary of a 529 Plan

The process for changing the beneficiary of a 529 plan varies depending on the plan provider. However, the general steps are as follows:

1. Contact your plan provider and request a change of beneficiary form.
2. Complete the form and return it to your plan provider.
3. Your plan provider will process the change and send you a confirmation.

Important Considerations

There are a few important considerations to keep in mind when changing the beneficiary of a 529 plan:

• Taxes: If you change the beneficiary to someone other than your child, you may be subject to income tax and a 10% penalty on the earnings in the plan.
• Gift tax: If you change the beneficiary to someone other than a family member, you may be subject to gift tax.
• Age of the beneficiary: There is no age limit on who can be a beneficiary of a 529 plan. However, if the beneficiary is under 18, the account owner must be a parent or legal guardian.

Conclusion

Changing the beneficiary of a 529 plan is a relatively simple process. However, it is important to understand the tax implications before making any changes. If you have any questions about changing the beneficiary of a 529 plan, please contact your plan provider.

Frequently Asked Questions

Can I change the beneficiary of a 529 plan to myself?

Yes, you can change the beneficiary of a 529 plan to yourself. However, if you do so, you will be subject to income tax and a 10% penalty on the earnings in the plan.

Can I change the beneficiary of a 529 plan to a trust?

Yes, you can change the beneficiary of a 529 plan to a trust. However, you should consult with an attorney to ensure that the trust is properly drafted to avoid any tax issues.

What happens if the beneficiary of a 529 plan dies?

If the beneficiary of a 529 plan dies, the account owner can change the beneficiary to another eligible person. If the account owner does not change the beneficiary, the funds in the plan will be distributed to the beneficiary's estate.

What are the tax implications of changing the beneficiary of a 529 plan?

If you change the beneficiary of a 529 plan to someone other than your child, you may be subject to income tax and a 10% penalty on the earnings in the plan.