Can I use a 529 account to save for a child who hasn’t been born yet?

Yes, but the unborn child cannot be the beneficiary of the account. The IRS requires that a 529 account be opened for a living beneficiary who has a Social Security Number. This requirement rules out opening a 529 account with an unborn child as the beneficiary. However, 529 plans offer the flexibility to later change the beneficiary. For example, a parent may open an account and initially list him or herself as the beneficiary, and once the child is born, change the beneficiary to the child. Before choosing an initial beneficiary, you should be aware of potential tax consequences of later changing the beneficiary.

U.S. tax considerations

Federal income tax

The IRS generally allows for changes of the beneficiary without federal income tax consequences, as long as the new beneficiary is a “Member of the Family” of the former beneficiary (as defined in the Plan Description). For example, when a parent changes the beneficiary from oneself to his/her child, there are no federal income tax consequences.

Federal gift (and generation-skipping transfer) taxes

Contributions to 529 accounts are generally considered by the IRS to be completed gifts to the beneficiary, and those gifts may be subject to federal gift tax and possibly generation-skipping transfer tax. There may also be federal gift and generation-skipping transfer tax consequences of changing the beneficiary, depending on the relationship between the new and former beneficiaries. For example:

Relationship between new and former beneficiaries

Tax consequences

The new beneficiary is the same generation as the former beneficiary and is a Member of the Family of the former beneficiary (e.g. beneficiary change from parent’s niece to parent’s child).

There are no federal gift or generation-skipping transfer tax consequences.

The new beneficiary is one generation below the former beneficiary (e.g. beneficiary change from parent to child).

There are federal gift tax consequences. The former beneficiary will be treated as having made a taxable gift to the new beneficiary. Note: When the parent is both the account owner and the beneficiary, contributions to the account are not considered gifts. In this case, the gift from parent to child occurs when the beneficiary is changed.

Generation-skipping transfer taxes do not apply to a beneficiary change unless the new beneficiary is two or more generations below that of the former beneficiary.

The first $14,000* of gifts made to each beneficiary during the calendar year (or $28,000 for a married couple filing jointly who elects to split gifts) is not subject to federal gift tax. By taking advantage of a special allowance for 529 plans, you can apply five years' worth of annual gift tax exclusions to a single gift upfront. This is commonly known as superfunding, and it enables you contribute up to $70,000 (5 x $14,000 annual exclusion) gift tax-free (or $140,000 for a married couple filing jointly). Any excess gifts may be applied against the contributor’s lifetime gift tax exclusion. For more information, see the IRS instructions for Form 709 (United States Gift Tax Return).

Other considerations

If you designate yourself as the initial beneficiary and the unborn child never comes into being, your options include:

  • Change the beneficiary to another Member of the Family;
  • Take a qualified withdrawal for your own higher education expenses; or
  • Take a non-qualified withdrawal, in which case earnings are subject to income taxes and a 10% federal penalty tax.

If the new beneficiary is not a "Member of the Family" of the former beneficiary (as defined in the Plan Description), the change will be treated as a non-qualified withdrawal, in which case earnings are subject to income taxes and a 10% federal penalty tax.

We recommend that you consult your own tax advisor about your individual circumstances, including potential state tax consequences, when changing a beneficiary of a 529 account.


*For 2016. See IRS instructions for Form 709 (United States Gift Tax Return).





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