Account Basics
You decide the beneficiary.
Each account needs a named beneficiary with a social security number and physical address. Anyone with a valid U.S. Social Security or Taxpayer Identification Number can be a beneficiary. An owner may name him/herself as a beneficiary. The account owner and beneficiary do not need to be related, but any later transfers will be only to the beneficiary’s relatives (see below).
While other states allow tax deductions on accounts started at any age, Utah has chosen to only allow state tax benefits if an owner starts the account before the beneficiary turns 19 years of age. If funds are deposited to beneficiary under age 19, then transferred to a beneficiary whose Utah account was started after age 19, there may be state tax consequences.
Sign up now for your own account–you become owner and beneficiary. If you have student loans, you have continuing education or licensing costs, or you later decide to go back to school some day, you will likely use it!
Aaron lives in Utah, is 18, and has a job. His parents didn’t know about 529 plans or care about saving for college. Aaron—now an adult—can sign up for an account in Utah and receive 4.45% tax credits from 529 contributions the rest of his life! However, he can only do this until age 19–act now, Aaron!
As a beneficiary is named, transfers may then be made to a member of that beneficiary’s family. Legal penalty-free transfers may be made to most relatives, including:
- 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.
(latest 2024 revision)
Carrie kindly starts an account for her financially-challenged neighbor who decides not to attend college. Carrie can later transfer unused funds to the neighbor’s sibling or cousin, but not back to Carrie’s own children’s funds.
Carrie may decide to instead cash out the funds and close the account, receiving a full refund of her deposits. Carrie will likely have to pay a small amount of federal and state taxes–as well as a 10% penalty–on any earnings. She could then redeposit funds remaining into her children’s accounts.
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.