Transferring leftover college funds doesn’t have to be a financial maze—and understanding how to roll over 529 education plan money from one person to another can save you from both stress and surprise tax bills. A 529 plan is a popular, tax-advantaged way to save for education costs, but what if the original beneficiary doesn’t need all the money? Maybe they got a scholarship, decided not to attend college, or didn’t use up all the funds. In that case, you’re allowed to roll over 529 plan funds to a qualifying family member without triggering taxes or penalties. This article unpacks everything you need to know about 529 plan rollovers, including who qualifies, how to do it, and why it’s a smart way to keep that college cash in the family. Whether you’re a parent, grandparent, or even an older sibling, you’ll walk away with a solid understanding of how to handle unused 529 savings wisely.
What Is a 529 Education Plan?
A 529 plan is a state-sponsored, tax-advantaged savings account specifically designed for qualified education expenses. These include tuition, fees, books, supplies, and even room and board in many cases. Contributions grow tax-free, and withdrawals are tax-free too—as long as the money is used for qualified education expenses.
There are two main types:
- Prepaid Tuition Plans – Pay for future tuition at today’s rates.
- Education Savings Plans – Invest money in mutual funds or ETFs to be used for future education costs.
Can You Rollover a 529 Plan to Another Person?
Yes, and it’s easier than you might think. The IRS allows tax-free rollovers of 529 plan funds from one beneficiary to another, provided the new beneficiary is a qualified family member of the original one.
Here’s the catch: you can only make one rollover per 12-month period for each beneficiary, and it must go to a 529 plan for the new beneficiary or to another type of qualified account (like a Roth IRA under new SECURE Act 2.0 provisions starting 2024—more on that later).
Who Can Receive a 529 Plan Rollover?
Not just anyone can receive your leftover education money. According to IRS rules, the new beneficiary must be a family member, including:
- Siblings (including step-siblings)
- Children, stepchildren, or adopted children
- Parents or step-parents
- Nieces and nephews
- Aunts and uncles
- First cousins
- In-laws
- Spouses of any of the above
That means you can transfer funds from one child’s 529 plan to another—or even to yourself or your spouse if you’re going back to school!
How to Rollover 529 Plan Funds Step-by-Step
Here’s a simplified version of the process:
- Check Eligibility: Confirm the new beneficiary is a qualified family member.
- Contact Plan Administrator: Each 529 plan is different, so reach out to your specific provider.
- Request the Rollover: This usually involves filling out a form and identifying the receiving 529 plan.
- Mind the 12-Month Rule: Remember, only one rollover is allowed every 12 months for the same beneficiary.
- Avoid Penalties: Make sure the rollover happens within 60 days to avoid taxes or penalties.
Pro tip: You can also change the beneficiary on an existing 529 plan instead of rolling the money over into a new plan—this keeps things simple and avoids extra paperwork.
Why Would You Rollover a 529 Plan?
There are a few smart reasons to do it:
- One child doesn’t use all their funds
- A child gets a full-ride scholarship
- You want to support another family member’s education
- You want to save the funds for future grandkids
This strategy keeps the money in the family and continues its tax-free growth instead of withdrawing it and facing penalties.
What About the New Roth IRA Option?
Thanks to SECURE Act 2.0, starting in 2024, you can roll over unused 529 funds (up to $35,000 over a lifetime) into a Roth IRA for the same beneficiary—without taxes or penalties.
Requirements include:
- The 529 must have been open for at least 15 years
- The rollover must not exceed annual Roth IRA contribution limits
- You can’t roll over contributions made in the last 5 years
This is a game-changer if your child doesn’t need the funds but could benefit from a jumpstart on retirement savings.
Common Mistakes to Avoid
- Rolling over to a non-qualifying relative → triggers taxes and a 10% penalty
- Trying to roll over too often → remember the 12-month rule
- Withdrawing for non-education purposes → this could cost you dearly
- Missing deadlines → like the 60-day rollover window
Stay organized and check with your plan’s administrator before making big moves.
FAQs
Q: Can I roll over a 529 plan to myself?
A: Yes! If you’re a qualified family member (which you are), you can use the funds for your own education.
Q: Is there a limit on how much I can roll over?
A: There’s no dollar limit on traditional rollovers, but only one rollover per beneficiary is allowed every 12 months.