I contributed funds from savings bond proceeds a few years back into a Virginia 529 with myself as both owner and beneficiary. The ultimate goal is to fund my (at the time) unborn grandchild's college education..
On an annual basis, I have been transferring $6k per year to a Virginia 529 owned by my adult son who has listed himself as beneficiary. Somewhere along the line, my son will change the beneficiary on his account to my grandson.
My questions pertains to:
- The "12 month rule" which states that "Only one income tax-free rollover of a 529 to a 529 for the same beneficiary is allowed per 12-month period."
- Any gift tax exposure for either myself or my son.
On #1, since my transfers involve a different beneficiary, it seems like I am not subject to the "12 month rule"?
On #2, I believe that it is considered a gift if your beneficiary change involves any "next generation". So, my transfer to my son is a gift, well within the annual gift exclusion. And my son would be making a gift to my grandson when he changes the beneficiary to his son rather than him.
This all seems excessively complicated. Am I understanding the rules correctly and is there a better way to accomplish my objective?