How to Transfer 529 Ownership From Parent to Child

A 529 plan is a tax-advantaged savings vehicle for future education costs. While a child is the designated beneficiary, the account must have an owner, typically a parent or guardian, who retains control over investments and withdrawals. It is possible to transfer this ownership from the parent to the child, a process involving several considerations and procedural steps. This article details the implications of such a transfer and outlines the necessary actions.

Key Considerations Before Transferring Ownership

Transferring ownership of a 529 plan has significant consequences for financial aid eligibility. When a parent owns the account, it is reported as a parental asset on the Free Application for Federal Student Aid (FAFSA). Under the current Student Aid Index (SAI) calculation, parental assets are assessed at a rate of up to 5.64%, which often has a minimal impact on the student’s aid package.

Transferring the plan to the child makes it a student-owned asset, which the FAFSA assesses at a much higher rate of 20%. This change means that for every $10,000 in the account, the student’s expected contribution toward college costs could increase by $2,000, compared to a maximum of $564 if the parent remained the owner. This can dramatically reduce the amount of need-based financial aid offered.

Another factor is that the parent relinquishes all control over the account. The child, as the new owner, gains full authority to manage investments, change the beneficiary, or take a non-qualified withdrawal, which is subject to income taxes on the earnings and a 10% federal penalty.

Information and Documentation for the Transfer

Before initiating an ownership change, you must gather specific information for both the current and new owner. For the parent, this includes their full legal name, residential address, and Social Security Number. You will also need the 529 account number, which is found on account statements or by logging into the plan provider’s online portal.

For the child who will become the new owner, you must provide their full legal name, permanent address, date of birth, and Social Security Number. Having these details prepared in advance will streamline the completion of the necessary paperwork.

The core of the transfer process is a specific document from the 529 plan administrator, often titled a “Change of Ownership Form.” You can find this document in the forms library on the provider’s website or request it by calling their customer service line.

Completing the form requires the information you have gathered. It is common for these forms to require a signature guarantee or notarization to verify the identity of the current owner and confirm their intent to transfer the account. Check the form’s instructions for this requirement before signing.

The Process of Changing Ownership

Once the Change of Ownership Form is completed and any required notarization is obtained, you must submit it to the 529 plan provider. Most providers offer a few methods for submission. The traditional method is to mail the physical, signed document to a specific address designated for processing, which can be found on the form or the provider’s website.

Many plan administrators also provide a secure online portal for document submission. This option allows you to upload a scanned copy of the completed and signed form directly through your online account. This method can be faster and provides an immediate digital record of your submission.

After the form has been submitted, the plan provider will begin its internal review and processing. You should expect to receive a confirmation of receipt, often via email or a notification in your online account, within a few business days. The complete processing time for an ownership change can vary but typically ranges from five to ten business days.

Upon successful completion of the transfer, the plan provider will send a final confirmation to both the former and new owner. The child, now the official account owner, will receive information on how to set up online access to manage their new account, and the parent’s access will be terminated.