How to Transfer a 529 Plan to Another Child

A 529 plan is a tax-advantaged savings account designed to help families set aside funds for future education costs. The account owner controls the funds and makes investment decisions, while the named beneficiary is the student for whom the money is intended. Account owners can change the beneficiary to another child or family member if circumstances change, a common practice that allows for flexibility. The process is straightforward but requires adherence to specific rules to avoid tax consequences.

Defining a Qualified Beneficiary Change

To transfer a 529 plan’s funds without incurring taxes or penalties, the new beneficiary must be a “member of the family” of the original beneficiary. This relationship is defined by the Internal Revenue Service (IRS) and is based on the original beneficiary’s family tree, not the account owner’s. This distinction is important for ensuring the change is a qualified tax-free event. The transfer is not limited to immediate family, extending to a broad network of relatives.

According to the IRS, the list of qualifying family members includes the beneficiary’s spouse, as well as their:

• Son, daughter, stepchild, foster child, or adopted child, or a descendant of any of them
• Brother, sister, stepbrother, or stepsister
• Father or mother, or an ancestor of either
• Stepfather or stepmother
• Niece or nephew
• Aunt or uncle
• Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law
• Spouse of any of the relatives listed above
• First cousin

Information and Documentation for the Transfer

Before initiating the transfer, the account owner must gather the new beneficiary’s full legal name, date of birth, and their Social Security or Taxpayer Identification Number. Having this information ready helps prevent delays.

The primary document for this process is the “Change of Beneficiary Form,” provided by the 529 plan administrator and available on their website. The form requires the account owner’s information, the existing account number, and the details for both the current and new beneficiaries. It will also ask for the new beneficiary’s relationship to the original beneficiary to confirm they are a “member of the family” under IRS rules.

The Process of Changing the Beneficiary

Once the Change of Beneficiary Form is completed, it must be submitted to the 529 plan administrator. Administrators offer several submission methods, including through an online portal, traditional mail, or fax.

After submission, the account owner will receive a confirmation from the plan administrator. This communication will acknowledge the request and provide an estimated processing time. Processing can take from a few business days to a couple of weeks, after which the new beneficiary will be reflected on the account statements.

Tax Considerations of the Transfer

When a 529 plan beneficiary is changed to a qualifying family member, the transfer is not considered a taxable event for federal income tax purposes. The account owner will not owe federal income tax on the account’s earnings, nor the 10% federal penalty that applies to non-qualified distributions. This tax-free treatment allows funds to be repurposed for another eligible family member’s education.

A specific tax to be aware of is the Generation-Skipping Transfer Tax (GSTT). This federal tax can apply if the new beneficiary is two or more generations younger than the original beneficiary, such as changing from a child to a grandchild. The tax uses the account owner’s lifetime GSTT exemption, which is a substantial amount ($13.99 million for an individual in 2025), so for most people, it does not result in an out-of-pocket tax payment.

While federal rules provide a clear framework, state tax treatment of beneficiary changes can differ. Some states have their own rules regarding qualified transfers and whether a change affects previously claimed state income tax deductions. Account owners should review the rules specific to their 529 plan or consult a tax professional to understand potential state-level tax consequences.