Mechanics of shifting 529 funds to new owner/beneficiary.

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shess
Posts: 2164
Joined: Wed May 17, 2017 12:02 am

Mechanics of shifting 529 funds to new owner/beneficiary.

Post by shess »

Context: Years ago, we funded 529 plans for our kids, and also for nieces and nephews. Since the nieces and nephews were mostly not born at the time, we prefunded them by putting a plan with me as owner and me as beneficiary, and another we me as owner and my spouse as beneficiary. We're using the Vanguard Nevada 529 plan.

Now is the time to get rolling on transfering things, but I'm a little confused as to how this happens, I mean the mechanics of it. My eventual goal is to have the funds in the beneficiary's account that is owned by the beneficiary's parent. I do not prefer to be personally involved in disbursements and general monitoring of their educational costs. For FAFSA reasons, it would be convenient to do this yearly between FAFSA filings, rather than all at once.

If I had an account where I was owner and the niece/nephew was beneficiary, I can make the transfer within the online interface. But, as far as I can tell, I cannot easily transfer from that account into an account owned by the parents. As far as I can tell direct rollovers require owner and beneficiary to match.

I can fill out a change-of-ownership form, which will result in a new account. This form requires a notary. This also results in a new account at Vanguard, so they still don't have the funds in their main 529 account.

There is a "Withdrawal Request Form" which has a checkbox for "Indirect rollover". This appears to cut a check to me, and then I deposit that check in another qualified 529 plan. The other options are all specific on whether the withdrawal is to the owner or the beneficiary, the indirect-rollover option does not mention either. But as mentioned direct rollovers appear to require that both match, so I _think_ that they probably have to match for an indirect rollover also, so I _think_ that this case is not viable. Additionally, the once-per-12-months rollover limit is a problem, because there are already multiple students and more inbound.

As best I can tell, I probably just have to sit down and grind these steps:
- Setup new plans at Vanguard with me as owner and each niece/nephew as beneficiary.
- Transfer funds from existing plans into those plans.
- Use change-of-ownership form to shift funds to the parents as owners of new plans at Vanguard.
- The parents can do direct or indirect rollovers or other qualified disbursements as they see fit.
Is that about the size of things?
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