Thanks, dc. Interesting argument. But I disagree that "The name on the 1099-Q and tax liability is a red herring." Nowhere in the tax code is someone taxed on income that is not theirs. To me, it's an absurd result to say that the student beneficiary is taxed on the income but the money isn't theirs. And if it's theirs, then they are using it for their own support.
And granted, the article for which you provided the link is now nearly 8 years old, but here's an excerpt from it of note:
"The estate and gift tax treatment of a change in beneficiaries follows the completed gift treatment of the contribution, providing additional support for the position that QTP distributions will be treated as funds provided by the student. Prop. Regs. Sec. 1.529-5(b)(3) states that
a transfer which occurs by reason of a change in the designated beneficiary, or a rollover of credits or account balances from the account of one beneficiary to the account of another beneficiary, will be treated as a taxable gift by the old beneficiary to the new beneficiary if the new beneficiary is assigned to a lower generation than the old beneficiary.
Treating the “old beneficiary” as the transferor for gift tax purposes supports treating the student as the provider of the QTP funds for purposes of the support test."