Question: I understand the owner of a 529 account can change the beneficiary. Who are the approved beneficiaries? Does it have to be a family member? What are the dos and don'ts of changing the beneficiary?

Answer: That's right. The owner can change the beneficiary.

But here's what you need to know about changing a beneficiary according to Mark Kantrowitz, publisher and vice president of research for Savingforcollege.com.

First, the new beneficiary must be a member of the family of the old beneficiary. A member of the beneficiary's family includes the beneficiary's:

  • Spouse
  • Son, daughter, stepchild, foster child, adopted child or a descendant
  • Son-in-law, daughter-in-law
  • Siblings or step-siblings
  • Brother-in-law, sister-in-law
  • Father-in-law, mother-in-law
  • Father or mother or ancestor of either, stepmother, stepfather
  • Aunt, uncle or their spouse
  • Niece, nephew or their spouse
  • First cousin or their spouse

"Iteration is permitted," says Kantrowitz. "You can change the beneficiary to someone who is a member of the family of a member of the family of the old beneficiary, etc. You just have to do it one step at a time."

For example, if you wanted to change the beneficiary to the daughter of the beneficiary's brother-in-law, you'd first have to change the beneficiary to the beneficiary's brother-in-law, then change it to that beneficiary's daughter, he says.

Check out this chart that shows who a family member is.

Although there is a limit to rolling over a 529 plan to a different state's 529 for the same beneficiary to once per 12-month period, and on changing the investment to twice per calendar year, Kantrowitz says there is no similar limitation on changing the beneficiary. "So, one could change the beneficiary multiple times a year," he says.

Note, however, that changing the beneficiary to a grandchild of the beneficiary may result in generation-skipping transfer tax (GST). "Most people will not have to worry about this, however," says Kantrowitz. If, however, the rollover stays in the same generation, there is no taxable gift.

Read more about the generation-skipping transfer tax here.

Got questions about the new tax law, Social Security, retirement and/or investments? Email Robert.Powell@TheStreet.com.

Question: I understand the owner of a 529 account can change the beneficiary. Who are the approved beneficiaries? Does it have to be a family member? What are the dos and don'ts of changing the beneficiary?

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