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

    Mistakes in Designating a Retirement Beneficiary

    Make sure your beneficiary designations not only reflect your intentions but also meet the requirements to be effective.
  2. Retirement

    What You Should Know About IRA Beneficiaries: Part 2

    Here's how IRAs, and the beneficiaries you name, work with wills and trusts.
  3. Financial Advisor

    How to Handle Client Beneficiary Designations

    Beneficiary designations are a critical financial planning step that can be easily overlooked. Here's how to ensure they are properly done.
  4. Retirement

    Why You Need to Update Retirement Account Beneficiaries

    The designation of beneficiaries in retirement accounts takes precedence over a will. Don't forget to keep them updated.
  5. Financial Advisor

    Why You Need to Find the Right IRA Beneficiary

    It definitely matters who you pick as your IRA beneficiary—and how you go about it. And in some cases, your best option may be to go with a trust.
  6. Retirement

    3 Ways People Accidentally Disinherit Loved Ones

    Proper beneficiary planning can ensure you don't accidentally disinherit loved ones.
  7. Retirement

    Who Gets Your Retirement Accounts?

    It’s important to review your financial beneficiary designations every year or two, or whenever you experience a major life change, like a divorce.
Frequently Asked Questions
  1. Why Do a Reverse Merger Instead of an IPO?

    Reverse mergers are often the most cost-efficient way for private companies to trade publicly.
  2. Determining a Firm's Percentage of Credit Sales

    Find out where to look for information about determining a company's percentage of credit sales.
  3. What Does the Diluted Share Price Reveal?

    Learn how diluted share price affects earnings and the company's overall financial performance.
  4. How Can Institutional Holdings Be More Than 100%?

    No entity can own more than 100% of a company's outstanding shares, but it can be reported that way.
Trading Center