Enrollment

Who can participate in a 529 plan?
Plans are generally available to all U.S. citizens or resident aliens with a valid Social Security number or Taxpayer Identification number. Certain other entities may be account owners, including custodial and trust accounts. An account owner must have a permanent U.S. address that is not a post office box. The beneficiary may be of any age, from newborn to adult. There are generally no restrictions on state of residence or income. (Certain 529 plans may have a residence restriction, however.)

Who can be a beneficiary of an account?
The person on whose behalf you're opening the account (the beneficiary) must be a U.S. citizen or resident alien with a valid Social Security or Taxpayer Identification number. Each account may have only one beneficiary, but you may open as many accounts for as many different beneficiaries as you want. You do not have to be related to the beneficiary, and you may choose yourself as the beneficiary.

Can a trust establish a 529 plan account?
Yes. To open an account as a trust, you typically must include copies of the pages of the trust agreement containing the name of the trust, the date of the trust, and a listing of all trustees and their signatures.

Can I open an account for more than one beneficiary?
Yes. While there can be only one beneficiary named for each account, you can open separate accounts for different beneficiaries.

Note: The same individual can be the beneficiary of multiple accounts. For example, a father, mother, grandparent, and uncle can each open a separate account for the same beneficiary and can also open separate accounts for other beneficiaries.

Can I open an account for an unborn child?
A beneficiary must have a Social Security number or Taxpayer Identification number, so an unborn child cannot be a beneficiary. However, you can name yourself as a beneficiary and change the beneficiary to your child later on. Please note that rules regarding gifts and generation-skipping transfer tax may apply in the case of a change of beneficiary. You should consult with a tax advisor when considering a change of beneficiary.

Can I open a 529 plan account with the money from my child's UGMA/UTMA?
A custodian for a minor under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act (UGMA/UTMA) can apply funds previously held in an UGMA/UTMA account to open an account in a 529 plan and can fund additional contributions to such an account, subject to the laws of the state under which the UGMA/UTMA account was established. Such a transfer of funds is generally a taxable event and you should consult with a tax advisor before transferring UGMA/UTMA assets to a 529 plan.

Who is considered the owner of the UGMA/UTMA 529 account assets?
A 529 plan permits the custodian to act as the account owner. The beneficiary does not have control of the assets in the account until the beneficiary has reached the age of majority.

Can I change the beneficiary of a UGMA/UTMA 529 account?
Generally, no. A custodian account owner may not select a new beneficiary (directly or by means of a rollover), except as permitted under UGMA/UTMA guidelines. When the custodianship terminates, the beneficiary is legally entitled to take control of the account and may become the account owner. Additional contributions of money not previously gifted to the beneficiary under the UGMA/UTMA act are often made to a separate, non-custodial account, to allow the account owner to retain control of the separate account after the custodianship terminates.

Can I change a 529 plan's beneficiary?
Yes, the beneficiary may be changed at any time without tax consequences as long as the new beneficiary is a "Member of the Family" of the current designated beneficiary as defined under Section 529. Please note that rules regarding gifts and generation-skipping transfer tax may apply in the case of a change of beneficiary. You should consult with a tax advisor when considering a change of beneficiary.

What if a beneficiary decides not to go to college?
In this case, you have three options:

  • Stay invested. You can leave the money in the account in case the beneficiary decides to attend school later. There is no age limit for using the money.
  • Change the beneficiary. You can change the beneficiary on your account at any time provided that the new beneficiary is an eligible "Member of the Family" of the former beneficiary.
  •  Withdraw the money for other uses (i.e. take a non-qualified withdrawal). The earnings portion of a withdrawal not used for a beneficiary's qualified higher education expenses is subject to federal and state income taxes and may also be subject to a 10% federal penalty tax. Exceptions to this penalty include a withdrawal made because the beneficiary:
    • Dies (if paid to a beneficiary of the account beneficiary or the estate of the beneficiary)
    • Becomes disabled
    • Receives a scholarship, to the extent the withdrawal amount does not exceed the scholarship amount
    • Attends a United States Military Academy, the United States Naval Academy, the United States Air Force Academy, the United States Coast Guard Academy, or the United States Merchant Marine Academy, to the extent that the amount of the withdrawal does not exceed the costs of education attributable to such attendance.

Any accumulated earnings that are withdrawn from your account must also be reported on the recipient's income tax return for the year in which they are withdrawn. And state tax deductions or credits may be subject to recapture in the case of a non-qualified withdrawal. Contact your tax advisor to determine how to report a non-qualified withdrawal.

Can an account owner be changed?
Generally, yes but the answer may vary based on state law or plan rules. Special rules apply for custodians of assets formerly held in an UGMA/UTMA account. UGMA/UTMA custodians are not permitted to change the account owner to anyone other than a successor custodian during the term of the custodial account under applicable UGMA/UTMA law. Because there may be additional tax considerations, please consult with a tax advisor before requesting a change of ownership.

How do I enroll in a 529 plan?
Some plans allow you to enroll online (all Upromise Investments-administered plans that are direct-sold offer this option). You can also request a paper enrollment kit and form. Then, after reviewing the offering document and selecting your investment options, just complete the enrollment form and send it back to the plan administrator.

If I want to establish an AIP or EFT option for my 529 plan, what type of bank account can I use?1
You must have a personal checking or savings account held with a U.S. financial institution that is a member of the Automated Clearing House (ACH) network. You cannot use a passbook savings account for an AIP or EFT option. Generally, money market accounts are not eligible.

Can I contribute to more than one 529 plan?
There is no limit to the number of accounts an account owner or beneficiary may have. However, states have limitations as to the total amount you can contribute to their plans on behalf of one beneficiary.



1 A plan of regular investment cannot assure a profit or protect against a loss in a declining market.