Most plans allow you to make withdrawals to yourself, the beneficiary, and/or the school. However, when you make a withdrawal to yourself as the account owner it can often cause the IRS to generate forms that make your life miserable (see this article for details). Just be aware and read that article.
That said, there is no reason you cannot make the withdrawal to yourself, and pass the money to your daughter for payment of your granddaughter's expenses, but you need to be able to reproduce that trail for the IRS in the event of an audit. The IRS will want to see that your withdrawal was used for a qualified higher education expense of the beneficiary. It'd be a nightmare if you withdrew money, handed it to your daughter, and she didn't tie it into a qualified expense, so ask for receipts!
Brian Boswell VP, Research & Development
This information does not constitute tax advice and is provided for informational purposes only. Please consult your tax advisor, financial advisor, local taxing authority, and/or plan provider or sponsor for more information.