How to Change the Beneficiary on Your 529 Plan

529 plans are designed to help save for the future education costs of a single beneficiary. But if that person no longer needs the money, you’ll have to decide what to do with it.

The good news is that you can change the beneficiary of a 529 plan at any time to a qualifying family member. Keep reading to learn who is eligible to be a new account beneficiary, how to change the beneficiary, and alternatives to consider.

Can you change the beneficiary of a 529 plan?

Yes, you can change the beneficiary of a 529 savings account. As long as you change the beneficiary to a qualifying family member, the transfer won’t count as a withdrawal, and there won’t be any federal tax consequences. According to the IRS, a qualified family member includes a:

• Spouse
• Child (biological, step, adopted, or foster), or descendant of a child
• Sibling or step-sibling
• Parent or ancestor of a parent
• Brother-in-law or sister-in-law
• Stepparent or parent-in-law
• The spouse of anyone listed above
• First cousin

There are many reasons you may want to change the beneficiary. For example, maybe the original account beneficiary decided not to go to college, qualified for scholarships to cover their tuition, or simply had some money left over after graduating.

Another reason you might change beneficiaries is if you’re a parent and used a single account to save for your children’s education, but now you need the money in separate accounts in order to use it for each of your children.

How to change a 529 plan beneficiary

Step 1: Confirm that the new beneficiary qualifies

Before changing the beneficiary of your 529 plan, confirm that the new beneficiary is a qualified family member. If you change the beneficiary to someone who’s not a qualified family member, the change may trigger federal income taxes and a 10% withdrawal penalty.

Step 2: Find the beneficiary change form

You can likely find the beneficiary change or transfer form on your 529 plan’s website, either as an online form or as a downloadable PDF. If you can’t find the form online, you can contact your 529 plan provider directly to get a copy of the form.

Step 3: Gather your necessary information

To complete the 529 plan beneficiary change form, you’ll need to provide several pieces of information, including:

• 529 plan account holder
• 529 plan account number
• Current beneficiary name, date of birth, and Social Security number
• New beneficiary name, date of birth, and Social Security number
• New beneficiary’s relationship to current beneficiary
• The amount of the account balance you want to transfer
• The new beneficiary’s 529 account number (if applicable)

Step 4: Complete and submit the form

Once you’ve gathered all the necessary documentation, you can complete the PDF or online form with all of the required information. Depending on your 529 provider, you may be able to submit it either online or by mail. Keep a copy for your records.

Step 5: Consider whether to change your investment selection

When you change the beneficiary of a 529 plan, you may also decide to change the investment allocation. Parents who use an age-based investment allocation to save for a child and later change the beneficiary to a younger (or older) family member should consider adjusting the investment allocation based on the new beneficiary’s age.

The beneficiary change form will likely include the option to change your investment selection. Additionally, if you’ve selected an age-based investment option and the new beneficiary is a different age, then the investment selection may change automatically.

Alternatives to changing your 529 plan beneficiary

It used to be the case that if you had unused money in a 529 plan, your only real options were to change the account beneficiary or take a taxable withdrawal from the account. But starting in 2024, account beneficiaries can now roll over up to $35,000 (in their lifetime, not per year) from a 529 plan to a Roth IRA as long as:

• The 529 plan has been open for more than 15 years
• The money you’re rolling over has been in the 529 plan for at least five years

Once the money is in the Roth IRA, it can be used for retirement savings or tapped into for other expenses later on.

In addition to these options, you can also use the 529 money for some lesser-known expenses, not just for college. For example, if the plan beneficiary doesn’t need the money for college, they could use it for trade or vocational school, an apprenticeship program, or professional certifications or continuing education.

Finally, the Secure 2.0 Act, which allows for the 529 to Roth IRA rollovers, also allows you to use up to $10,000 of 529 funds in your lifetime to put toward your student loans.

The bottom line

A 529 plan is a valuable asset with major tax benefits, and it’s important to make the most of it. In some cases, that might mean changing the beneficiary of the account to ensure it’s being used for its intended purpose. Luckily, it’s easy to change the beneficiary of a 529 plan to another qualified family member, and there usually aren’t any tax consequences.

Frequently asked questions (FAQs)

Can a 529 plan have more than one beneficiary?

No, a 529 plan can only have one beneficiary at a time. If you have multiple children, you can either use a single 529 plan and take qualified distributions for one child at a time, or set up separate 529 plans for each child. You can change the beneficiary whenever needed if the original beneficiary doesn’t use all the funds.

Do you have to pay taxes if you change a 529 beneficiary?

You don’t have to pay federal income taxes or penalties when you change a 529 beneficiary to a qualified family member. However, there may be gift tax implications if the new beneficiary is in a younger generation than the original beneficiary and the account balance exceeds the annual gift tax exclusion.

What family members qualify as a new 529 beneficiary?

Qualified family members include your spouse, children (biological, step, adopted, or foster), siblings, parents, grandparents, in-laws, stepparents, first cousins, and the spouses of anyone listed. The new beneficiary must be related to the original beneficiary to avoid taxes and penalties.

Can I change the beneficiary multiple times?

Yes, you can change your 529 beneficiary as many times as you want, as long as each new beneficiary is a qualified family member. There’s no limit on the number of beneficiary changes you can make.

Can I transfer 529 funds to a Roth IRA instead of changing the beneficiary?

Yes, starting in 2024, you can roll over up to $35,000 (lifetime limit) from a 529 plan to a Roth IRA in the beneficiary’s name. The 529 must have been open for more than 15 years, and the funds being rolled over must have been in the account for at least five years.

What happens to money in a 529 if the child doesn’t attend college?

If your child doesn’t attend college, you have several options: change the beneficiary to another family member, roll up to $35,000 to a Roth IRA for the beneficiary, use the funds for trade school or apprenticeships, apply up to $10,000 toward student loans, or take a non-qualified withdrawal (which incurs taxes and penalties on earnings).