1. 529 Plans: Introduction
  2. 529 Plans: Types of Plans
  3. 529 Plans: Eligibility
  4. 529 Plans: Contributions
  5. 529 Plans: Distributions
  6. 529 Plans: Conclusion

Anyone can establish and contribute to a 529 plan on behalf of a designated beneficiary. This means that relatives, family, friends – even the designated beneficiary him- or herself – can establish a 529 plan.

But the rules do vary. For instance, some 529 plans limit participation to residents of the state while others allow anyone to participate, regardless of the individual's state of residence. Individuals should check with the financial institution or educational institution providing the plan to determine the eligibility requirements for establishing an account under that particular plan.

Some 529 plans may have established enrollment periods before which new accounts must be opened.

Age and Income Requirements

Unlike Coverdell ESA programs, 529 plans do not have income restrictions. Some 529 plans – although there are very few – place age restrictions on designated beneficiaries. Individuals must check with the plan provider and the plan documents to determine whether there are any restrictions that apply to the 529 plan they want to establish for the designated beneficiary.

The investment options available under the plan may be determined by the age of the beneficiary, and are often automatically adjusted as the beneficiary's age moves from one range to another. For prepaid tuition programs, the cost per credit may be determined by the number of years that the designated beneficiary has left before he or she reaches a certain age- usually the age that students typically begin attending college.

Changing the Designated Beneficiary

Like the ESA, the 529 plan allows the designated beneficiary to be changed to a qualified family member who meets any age requirements as determined by the plan.

For the purpose of determining who can become a designated beneficiary of a 529 plan, a qualified family member includes the following:

  • The designated beneficiary's spouse
  • The designated beneficiary's son or daughter or descendant of the beneficiary's son or daughter
  • The designated beneficiary's stepson or stepdaughter
  • The designated beneficiary's brother, sister, stepbrother or stepsister
  • The designated beneficiary's father or mother, or ancestor of either parent
  • The designated beneficiary's stepfather or stepmother
  • The designated beneficiary's niece or nephew
  • The designated beneficiary's aunt or uncle
  • The spouse of any individual listed above, including the beneficiary's son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law
  • Any individual for whom the home of the designated beneficiary is his or her primary home for the entire tax year The designated beneficiary's first cousin

Amounts that are rolled over to a new designated beneficiary must be rolled over within 60 days of being distributed. Alternatively, the change can be made by changing the name and tax identification number on the 529 account to that of the new designated beneficiary. (For related reading, see How and When to Switch Your 529 Plan.


529 Plans: Contributions
Related Articles
  1. Retirement

    The Importance of Updating Retirement Account Beneficiaries

    Retirement account beneficiaries should be reviewed and updated on a regular basis to avoid any outdated information. This prevent any confusion in a time of loss.
  2. Retirement

    Breaking Down IRA Beneficiaries: Part 1

    It's important to give serious consideration to your IRA beneficiary designations.
  3. Retirement

    September 30: A Key Date For Retirement Plan Beneficiaries

    Unless certain action is taken by this date, distribution rules can put the youngest inheritor at a disadvantage.
  4. Retirement

    Distribution Rules For Inherited Retirement Plan Assets

    If you've recently inherited a retirement plan, you must get to know the rules for distributing the funds.
  5. Retirement

    Why Your Estate Shouldn't Be Your IRA Beneficiary

    Here are five reasons why you should not name your estate as your IRA beneficiary.
  6. Retirement

    Be Smart in Naming Beneficiaries of Your 401(k)

    Listen up: Hidden in the pesky details of filling out 401(k) forms are important tax implications. And it's a legacy to people you love.
  7. Retirement

    Don't Forget The Kids: Save For Their Education And Retirement

    Retirement and education financing are the two most important planning items for taxpayers.
Trading Center