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Question for the Money Doctors

Question submitted on Mar 12, 2015.


I have a child that will be entering college in the fall. I have other children 16 and 12 respectively. I have taken out (on 2/18/15) all of the Coverdell money from each of their accounts. I have opened up one 529 for my college bound child. I want to combine the money from the 12 year old and put it in the 18 yr. old's 529. Can I do this without paying a penalty. If the money is used for qualifying expenses - i.e. tuition - should the IRS really care where it came from and for whom it was used for?
Thank you for any insight you can provide


A distribution from a Coverdell Education Savings Account can be rolled into a 529 account without penalty as long as the rollover is performed in the same taxable year and for the same beneficiary.  Your 12-year-old’s Coverdell money can only be rolled into a 529 which designates him/her as the beneficiary.

However, once the 529 account has been set up for the 12-year-old, you can either change the beneficiary to the 18-year-old, or simply roll the funds from one sibling’s 529 to the other without any tax consequences.

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