529 Plan Change Beneficiary: A Comprehensive Guide

Introduction

A 529 plan is a tax-advantaged savings plan designed to help families save for college expenses. 529 plans offer a variety of benefits, including tax-free investment growth and tax-free withdrawals for qualified education expenses.

One of the most important decisions you will make when opening a 529 plan is who you name as the beneficiary. The beneficiary is the person who will ultimately receive the money in the plan. You can name yourself as the beneficiary, your child, or another family member.

Changing the Beneficiary of a 529 Plan

There may come a time when you need to change the beneficiary of your 529 plan. For example, you may want to change the beneficiary if your child decides to attend a different college than you originally planned.

To change the beneficiary of a 529 plan, you must contact the plan provider. The plan provider will provide you with a change of beneficiary form. You must complete the form and return it to the plan provider.

Considerations When Changing the Beneficiary

There are a few things to consider when changing the beneficiary of a 529 plan:

• Tax implications: Changing the beneficiary of a 529 plan may have tax implications. If you change the beneficiary to someone other than your child, you may be subject to gift tax.
• Age of the beneficiary: If you change the beneficiary to someone who is younger than the original beneficiary, you may be subject to the Kiddie Tax.
• Residency of the beneficiary: If you change the beneficiary to someone who is not a resident of the state in which the 529 plan is established, you may be subject to state income tax on the earnings in the plan.

Tips for Changing the Beneficiary

Here are a few tips for changing the beneficiary of a 529 plan:

• Contact the plan provider: The first step is to contact the plan provider. The plan provider will provide you with a change of beneficiary form.
• Complete the form: You must complete the change of beneficiary form and return it to the plan provider.
• Keep a copy of the form: Be sure to keep a copy of the change of beneficiary form for your records.

Common Mistakes to Avoid

Here are a few common mistakes to avoid when changing the beneficiary of a 529 plan:

• Not completing the form correctly: Be sure to complete the change of beneficiary form correctly. If you make a mistake, the change of beneficiary may not be processed.
• Not returning the form to the plan provider: Be sure to return the change of beneficiary form to the plan provider. If you do not return the form, the change of beneficiary will not be processed.
• Not keeping a copy of the form: Be sure to keep a copy of the change of beneficiary form for your records. If you lose the form, you may have difficulty proving that you changed the beneficiary.

Conclusion

Changing the beneficiary of a 529 plan is a relatively simple process. However, it is important to understand the tax implications and other considerations before making a change. By following these tips, you can avoid common mistakes and ensure that your 529 plan meets your needs.

Additional Resources

• IRS Publication 970
• 529 Plan Change Beneficiary
• Change the Beneficiary of a 529 Plan

Frequently Asked Questions

• Can I change the beneficiary of a 529 plan after the money has been withdrawn?

No, you cannot change the beneficiary of a 529 plan after the money has been withdrawn.

• What happens if I do not change the beneficiary of a 529 plan and the original beneficiary dies?

If you do not change the beneficiary of a 529 plan and the original beneficiary dies, the money in the plan will be distributed to the beneficiary's estate.

• Can I name multiple beneficiaries for a 529 plan?

Yes, you can name multiple beneficiaries for a 529 plan. However, only one beneficiary can receive the money at a time.

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

Yes, you can change the beneficiary of a 529 plan to yourself. However, you may be subject to gift tax if you do so.

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