Taxation on beneficiary change to next generation

[1929632]

If a change of beneficiary occurs and a new generation beneficiary{ex.grandchild takes the place of a child of the participant} is established, what are the tax implications at that point?

[bwilk]

I sure hope you are also getting these answers confirmed by your firm. I would hate to find out I was paying a financial consultant to go out to a website I could visit for free to find answers to my questions.

Beneficiary change is gift from old to new if same or younger generation.

[drew]

Whoops?
Only a move to yet a younger generation is treated as a gift for gift tax purposes and its treated as being made by the prior beneficiary who may well not be the owner.

Ergo if you step it down generations gradually you avoid any skip tax issues as well.

You can transfer infinite sums on same generation or to an older generation w/o gift tax under 529 rules.