529 Plans

How to Transfer Money Between 529 College-Savings Accounts

There is no limit to how much you can move or how often you can move funds between beneficiaries.

I have multiple grandchildren, each with a 529 college-savings account. My oldest grandson is about to start college in the fall, and I’d like to transfer some money from another grandchild’s account into his. Can I switch money from one grandchild’s account to another, and are there any tax consequences or penalties?

You can change the beneficiary on the account from one eligible family member to another without penalties or taxes. Eligible family members are based on their relationship to the beneficiary and include the beneficiary’s spouse; child or stepchild; sibling or step-sibling; parent or stepparent; aunt or uncle; niece or nephew; son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law; the spouse of any of those relatives; or a first cousin. See IRS Publication 970, Tax Benefits for Education, for the full list and more information.

The procedures vary by plan, but you should be able to move any amount of money from one beneficiary to another. For example, you could move 50% of the money from one grandchild’s account to another grandchild’s account, says Keith Bernhardt, vice president of retirement and college products for Fidelity. At Fidelity, you would fill out a beneficiary change form and include both account numbers (you’d need to open a new account if you didn’t already have one for the new beneficiary). If you request a partial rollover, you can specify how much money to move from each investment within the account. You can also specify where to invest the money in the new beneficiary’s account, if that’s different from the allocation instructions already on file for the account.

There is no limit to how much you can transfer or how often you can transfer funds between beneficiaries, as long as the account balance is within the plan’s maximum contribution limits, says Charu Gross, head of Vanguard’s education savings group. Maximum contribution limits vary by plan but are between $235,000 and $370,000 in most states (a few are higher). You can compare each plan’s maximum contribution limits at SavingforCollege.com.

Don’t wait until the last minute before college bills are due to make the change. Contact the plan to discuss your options well before you’ll need the money, in case the paperwork takes longer than expected or you face unforeseen administrative requirements, says Brian Boswell, of Savingforcollege.com.

Most Popular

Don’t Be Tricked Into Voluntarily Paying Higher Taxes on Your IRA
IRAs

Don’t Be Tricked Into Voluntarily Paying Higher Taxes on Your IRA

Traditional IRAs are set up in a way that basically incentivizes you (and your heirs) into paying the highest tax bill possible. Don’t fall for it. Co…
July 4, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Retirees, Make These Midyear Moves to Cut Next Year's Tax Bill
Tax Breaks

Retirees, Make These Midyear Moves to Cut Next Year's Tax Bill

Save money next April by making these six hot-as-July tax moves.
July 1, 2022

Recommended

When Will Student Loans Be Forgiven?
Paying for College

When Will Student Loans Be Forgiven?

Millions of Americans are waiting for the Biden Administration’s next hint, which could come later this summer, at how he’ll address the student loan …
June 27, 2022
Financial Advice I Would Give My Younger Self – Planning for Education Funding
college

Financial Advice I Would Give My Younger Self – Planning for Education Funding

College 529 plans vs. Roth IRAs: A financial expert shares what she wishes she had known when saving for her own law school and her son’s college. Tak…
June 21, 2022
25 Best College Majors for a Lucrative Career
college

25 Best College Majors for a Lucrative Career

One way to increase your chances of earning a good living is to pick a college major that prepares you to work in a field that pays well. Here are som…
May 31, 2022
How to Split $250,000 in Student Loans in a Divorce
Paying for College

How to Split $250,000 in Student Loans in a Divorce

Before you just sell the house and write a check to pay off your Parent PLUS loans, look at all your options. One could potentially save you a couple …
April 7, 2022