529 plans are considered assets of the account owner, which is often a parent. The 529 plan account owner may change the beneficiary or take a distribution at any time for any reason, whether or not it is in the best interest of the original beneficiary. In most cases, parents appreciate this flexibility.
Who is an eligible family member for 529 Transfer?
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.
How much money can grandparents put in a 529 plan?
Under current law, grandparents can give up to $15,000 annually per grandparent to each grandchild, or as much as $75,000 each in a one-time gift to cover five years. Whatever the amount, grandparents can give their grandkids a huge advantage by funding a 529 on their behalf.
Can a 529 be transferred to a parent?
Although there is nothing that currently says the mere change of ownership to the parents is to be treated as a gift from you to them, the IRS has proposed new rules that could in the future have that effect. You will need to check with your 529 plan administrator about the process involved with changing ownership.
Can a 529 plan be changed if the beneficiary chooses not to attend college?
What many people don’t know about 529 plans is that if the beneficiary chooses not to attend college, you don’t automatically lose the money in the account. Most 529 plans allow you to change the beneficiary or transfer the money in the account to an eligible relative.
Do you need to file a gift tax return for 529 plan?
The IRS allows one tax-free rollover per 12-month period for 529 plans with the same beneficiary. While no income taxes would be due, you may need to file a gift tax return depending on your situation. We would recommend consulting your tax advisors to determine if this is necessary.
