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Moving Your 529 College Saving Plan is Easy

Jul 3, 2012

You have been saving regularly in a 529 College Saving Plan for many years and you like your plan but have found another plan that has lower fees. Is it possible to move the money from one 529 plan to another?

This is a common question that has many people baffled. But the simple answer is yes. If you want to move your money to another plan, to another plan that happens to be in another state it is relatively easy.

A question many people worry about is if you move the investment does it negate your tax free growth status? No, you still can keep your tax free status because the plan you are coming from and the plan you are going to are both 529 plans.

The two ways a transfer happens is either by you receiving a check from the old 529 plan or a direct transfer from one 529 plan to another. When you choose the first option you have 60 day to complete the process. If you miss the the time frame you will be subject to taxes and penalties.

Current tax law considers a rollover valid when you transfer the money either to a different plan for the benefit of the original beneficiary or to a different qualifying beneficiary.The wording of the rule is deceptively simple, yet may be tricky.

For example, rollover treatment can be disallowed if you withdraw funds from your 529 plan, then change your mind and redeposit the funds into the same account with no change in beneficiary. That's true even if you complete the transaction within 60 days.A one-time-per-year limit may apply to rollovers.

In addition, some states impose penalties, fees, or recapture taxes when you transfer to an out-of-state plan.

Got further questions? Catch me on twitter and DM me @529SavingsPlans or e-mail me at 529CollegePlans at Gmail.com. Want to be heard? Leave a reader comment below.

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