Moving 529 Money Between Beneficiaries is a Piece of Cake

If you have multiple grandchildren with 529 college-savings accounts, can you move some money from one grandchild’s account into the oldest grandson’s account, since he’s starting college in the fall? Kiplinger says you sure can in “How to Transfer Money Between 529 College-Savings Accounts.” 8-22-2016

As the owner of the account, you have the ability to change the beneficiary on the account from one eligible family member to another without any type of penalty or tax. The definition of an “eligible family member” is based on the individual’s relationship to the beneficiary. This will include the beneficiary’s spouse, child or stepchild, sibling or step-sibling, parent or stepparent, aunt or uncle, niece or nephew, an in-law, the spouse of any of those relatives, or a first cousin. You can review the entire list in IRS Publication 970, Tax Benefits for Education.

The way that you make the transfer will vary by plan, but in almost all cases, you should be able to move any amount of money from one beneficiary to another—such as transferring 50% of the money from one grandchild’s account to another grandchild’s account.

For example, at Fidelity, you’d need to complete a beneficiary change form with both of the account numbers. You would have to open up a new account if you didn’t already have one for the new beneficiary. Also, if you decide to do a partial rollover, you can designate the specific amount of money to move from each investment within the account. You also have the ability to say where that money should be invested for the new beneficiary’s account if different from the allocation directions on file for the account.

529 accounts don’t have a limit on how much you can transfer or how often you can transfer funds between beneficiaries, provided the account balance is within the plan’s maximum contribution parameters. The maximum contribution limit will vary by plan, but they’re typically between $235,000 and $370,000 in most states—with a few states having higher limits.

Be proactive and don’t wait until the last second when college bills are due to make these changes. Contact the plan administrator to talk about your options before you’ll need the money. You never know if the paperwork will be delayed longer than you expect or if there are unforeseen administrative requirements.

Reference: Kiplinger ( June 28, 2016) “How to Transfer Money Between 529 College-Savings Accounts”

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