A 529 plan account owner may change the beneficiary at any time without tax consequences when the new beneficiary is a family member of the current beneficiary. The IRS provides a broad definition of an eligible family member, which includes the original beneficiary’s blood relatives and relatives by marriage and adoption.
Before changing your 529 plan beneficiary, it’s important to understand who qualifies as a member of the beneficiary’s family.
Who is a member of the family?
According to the IRS, a member of a 529 plan beneficiary’s family includes the beneficiary’s:
- Spouse
- Son, daughter, stepchild, foster child, adopted child, or a descendant
- Son-in-law, daughter-in-law
- Siblings or step-siblings
- Brother-in-law, sister-in-law
- Father-in-law, mother-in-law
- Father or mother or ancestor of either stepmother, stepfather
- Aunt, uncle, or their spouse
- Niece, nephew, or their spouse
- First cousin or their spouse
A 529 plan beneficiary could also be changed to an ancestor of a stepfather or stepmother, even though they are not listed. To make this change, the 529 plan account owner would change the beneficiary to the stepfather or stepmother and subsequently change the beneficiary to their mother or father or any ancestor (assuming they are still living).
It is still possible to help friends and other non-family members pay for college. 529 plans accept gift contributions from any third party, regardless of whether the gift giver is a family member. However, the account owner retains full control over the 529 plan.

Changing a 529 plan beneficiary
529 plans are designed to save for future education expenses for a single designated beneficiary. However, a 529 plan account owner may change the beneficiary by completing a form on the 529 plan’s website. Beneficiary changes are not treated as a distribution when the new beneficiary is a member of the current beneficiary’s family.
There are several reasons why a 529 plan account owner may want to change the beneficiary. For example, tax-free 529 plan distributions may be used to pay for qualified education expenses for one child only. Families who use a single 529 plan to save for more than one child’s college will have to change the beneficiary once they are ready to pay for the next sibling’s college expenses.
Distributions used to pay for college expenses for anyone other than the designated beneficiary will be considered non-qualified withdrawals and subject to federal income tax, a 10% penalty on the earnings portion, and possible recapture of state income tax benefits.
Families may also avoid the twice per calendar limit on 529 plan investment changes and the one rollover per 12-month period limitations when the request is submitted with a beneficiary change request.
Gift tax and generation-skipping transfer tax
When changing beneficiaries, there are some additional potential tax implications to be aware of. Most families will not have to pay taxes when changing a 529 plan beneficiary from a grandparent to a grandchild. Taxpayers may give up to $18,000 per year ($36,000 if married) under the annual gift tax exclusion, and up to $13.61 million per individual qualifies for the lifetime gift tax exemption. As long as the amount falls within these exclusions, you likely won’t owe gift tax due to the change.
Changing a 529 plan beneficiary may result in generation-skipping transfer tax (GST) when the new beneficiary is two or more generations below the current beneficiary. For example, when a 529 plan beneficiary is changed from a grandparent to a grandchild, the grandparent’s estate would be subject to the GST. A grandparent may have been named a 529 plan beneficiary if they opened a 529 plan account before the grandchild was born.
GST may also apply when grandparents contribute to a grandchild’s 529 plan. With 5-year gift tax averaging, each grandparent can gift up to $90,000 per grandchild. However, most families will not have to pay taxes when changing a 529 plan beneficiary from a grandparent to a grandchild, as the GST typically applies only to large estates exceeding the $13.61 million exemption.