529 change of ownership and rollover

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
kitand
Posts: 1
Joined: Wed Mar 07, 2018 5:25 pm

529 change of ownership and rollover

Post by kitand » Wed Mar 07, 2018 5:56 pm

15 years ago, I set up 529 college saving accounts for my kids. The accounts are "owned" by a joint living trust (titled after my wife and me), and I am the "authorized agent" for transactions on the account. There are two changes we'd like to make at the same time: (1) we are in process of "simplifying" estate matters, so we'd like to convert the accounts to individual-owned (not trust-owned) accounts, and (2) we'd like to rollover to a different state's plan. There are no state tax issues to consider, and we haven't done any rollovers ever before, so no limits on that.

Changing ownership in the current 529 is possible but the paperwork is rather cumbersome, plus it involves creating new individually-owned accounts there, which we don't want anyway.

Has anyone heard of any federal tax difficulties--or other potential snafus--related to simply "cashing out" the trust-owned accounts and doing an indirect rollover within 60 days to individually-owned accounts with the same beneficiaries? This would be a no-brainer, I think, if it weren't for the change of ownership from our trust to myself or my wife. Does it matter at all that our trust is not the same "entity" as us? Would transferring ownership result in unwanted "gifting" issues to ourselves?

Post Reply