A 529 plan is either a pre-paid tuition plan or a savings plan maintained by a state or a school to help defray educational expenses. The laws under which these plans are created promote savings by offering federal or state tax benefits for contributions to the plan. Accounts are to be used to pay for college tuition or the cost of other training after high school for a designated beneficiary. Although anyone can be named as a beneficiary, they are typically children or grandchildren of the individuals who open the account. If the beneficiary does not attend college or receives a full scholarship, you may need to change the beneficiary of the plan. There are no tax consequences if you change the beneficiary to another member of the family.
Obtain and review a copy of your 529 plan to determine the protocol specific to your broker and plan.
Call or visit your broker and request a change-of-beneficiary form. Alternatively, you can go to your broker’s website and download the form.
Complete the change-of-beneficiary form. Provide your account number, your name and Social Security number, and the current beneficiary’s name and Social Security number. Enter the new beneficiary’s name, date of birth, Social Security number and state of residence. You will also need to explain the relationship between the current beneficiary and the new beneficiary.
Return the change-of-beneficiary form to your broker.
Tips & Warnings
If there is money in a 529 plan that has not been distributed, the 529 plan can be rolled over to another plan either for the benefit of that same beneficiary or for a member of that beneficiary’s family. Changing the beneficiary to a relative of the current beneficiary allows the transfer to be made tax-free.
You may only change a beneficiary once a year without incurring tax penalties.
References & Resources
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