Transfers may be made between accounts of family members.
Transfers of funds between in-family beneficiaries generally count as allocation changes, limited to 2 times per year.
Section 529 of the Internal Revenue Code defines “member of the family” as:
- The father, mother or the ancestor of either parent.
- A child (including a legally adopted child) or the descendant of a child.
- A stepfather or stepmother.
- A stepson or stepdaughter.
- A brother, sister, stepbrother, stepsister, half-brother or half-sister.
- A brother or sister of the father or mother.
- A brother-in-law, sister-in-law, son-in-law, daughter-in-law, father-in-law or mother-in-law.
- A son or daughter of a brother or sister.
- A spouse of any person mentioned above.
- A spouse of the beneficiary.
- A first cousin.
(2024 revision)
Ellen generously opens a 529 account for her daughters Tami and Rhonda, as well as another account for the daughter of her cleaning lady, Jodi. Per 529 family rules, Ellen can transfer funds from Tami to Rhonda, but Ellen cannot transfer Jodi’s funds to Tami or Rhonda (They are in different families). Jodi’s funds could be transferred to her own siblings, cousins, and later children, however.
No statement or example on this site should be considered a specific recommendation for your personal situation. Investing and tax strategies each carry significant risks. Examples herein may not apply to your situation. Please consult your estate attorney, tax advisor, or financial advisor for personal advice.