From IRS Publication 970 Tax Benefits for Education
Note: Qualified tuition programs (QTPs) are also called "529 plans."
Changing the Designated Beneficiary
There are no income tax consequences if the designated beneficiary of
an account is changed to a member of the beneficiary's family. See
Members of the beneficiary's family , earlier.
Members of the beneficiary's family.
For these purposes, the beneficiary's family includes the
beneficiary's spouse and the following other relatives of the
- Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them.
- Brother, sister, stepbrother, or stepsister.
- Father or mother or ancestor of either.
- Stepfather or stepmother.
- Son or daughter of a brother or sister.
- Brother or sister of father or mother.
- Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
- The spouse of any individual listed above.
- First cousin.
regarding ownership changes:
Any amount distributed from a QTP isn't taxable if it is rolled over
to another QTP for the benefit of the same beneficiary or for the
benefit of a member of the beneficiary's family (including the
beneficiary's spouse). An amount is rolled over if it is paid to
another QTP within 60 days after the date of the distribution.
Don't report qualifying rollovers (those that meet the above criteria)
anywhere on Form 1040 or 1040NR. These aren't taxable distributions.
When Aaron graduated from college last year, he had $5,000 left in his
QTP. He wanted to give this money to his younger brother, who was in
junior high school. In order to avoid paying tax on the distribution
of the amount remaining in his account, Aaron contributed the same
amount to his brother's QTP within 60 days of the distribution.
So it appears that as far as the IRS in concerned the rollover could be done to change ownership as long as the beneficiary was in the same family.
It is possible that there could be a state tax issue with the change of ownership, if it changed from a plan in state A to one in state B; and state A treated the original contributions as a tax deduction. So check the guidelines for the specific 529 plan.