Income tax center

Can I change the beneficiary of my 529 account?

[Excerpts from Chapter 3 of The Best Way to Save for College – A Complete Guide to 529 Plans (2015-16 Edition)]

Section 529 allows the account owner to replace the current designated beneficiary with a new beneficiary who is a "member of the family" (see below). All 529 plans accommodate a change in beneficiary without imposing a penalty, although some may have age or residency restrictions, and some may charge a fee. There are no federal income tax consequences of a beneficiary change; however, there can be gift tax consequences when the new beneficiary is at least one generation below the old beneficiary.

"Member of the family" means an individual who has one of the following relationships to the current beneficiary:

• A son or daughter (natural or legally adopted), or a descendant of either;
• A stepson or stepdaughter;
• A brother or sister (by whole or half-blood), or stepbrother or stepsister;
• The father or mother, or an ancestor of either;
• A stepfather or stepmother;
• A niece or nephew;
• An aunt or uncle;
• A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law;
• The spouse of the designated beneficiary (who must have the same principal place of abode) or the spouse of any of the relatives listed above (who must have the same principal place of abode);
• A first cousin.

Next: Can I transfer my account from one state's 529 plan to another state's 529 plan?