Does a Change of 529 Plan Beneficiary Have Gift Tax Consequences?

Discussion in 'Tax' started by Tom Russ, Nov 5, 2008.

  1. Tom Russ

    Tom Russ Guest

    The contribution of money into a 529 plan for college expenses clearly
    has some gift tax consequences, and even some special rules (like the
    5-year consolidation option). But 529 plans also remain under the
    control of the donor, who can designate a different beneficiary for
    the 529 plan.

    Let's assume, that some time has passed from the initial funding of
    the plan, and the amount of money has grown. For the sake of argument
    assume the balance is now $100,000.

    So, my question is whether changing the beneficiary has any gift tax
    consequences. Does this count as a gift of the amount of the account
    that has the beneficiary redesignated?

    And if not, does that provide a way* around the annual limit, by
    setting up multiple accounts for nieces, nephews, etc. and then later
    changing the beneficiary to one's own child?

    ================================

    * OK, it is a cumbersome way around it, is not an unencumbered gift
    (due to 529 plan rules), and carries some risk of the donor dying
    before the change is made, but still.

    (Inspired by another post, but a different issue).

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    Tom Russ, Nov 5, 2008
    #1
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