Only the Purchaser Can Make Contract Decisions
While anyone may contribute toward the payment of a Contract (such as through a gift contribution), there is only one Purchaser for tax reporting and administrative purposes. Only the Purchaser can make decisions such as:
- Choosing the type of Tuition Units
- Payment method
- Changing the Beneficiary
- Cancelling a Contract
- Requesting a refund
- Deciding when and how Tuition Units are used
Generally, the Purchaser owns all rights with respect to a Contract.
Changing the Beneficiary
With the exception of Contracts owned by minor Purchasers through UGMA/UTMA custodial accounts, the Purchaser may change the Beneficiary of a Contract upon submission of a Change of Beneficiary Form. Under Texas Law, the new Beneficiary must be a Texas resident or the child of a parent who is both a Texas resident and the Purchaser on the date the designation is changed.
The new Beneficiary must also be a “member of the family” of the preceding Beneficiary, as defined by IRS Publication 970. The Beneficiary’s family includes the Beneficiary’s spouse and any of the following other relatives of the Beneficiary:
- 1. Son, daughter, stepchild, foster child, adopted child, or a descendent of any of them.
- 2. Brother, sister, stepbrother, or stepsister.
- 3. Father or mother or ancestor of either.
- 4. Stepfather or stepmother.
- 5. Son or daughter of a brother or sister.
- 6. Brother or sister of father or mother.
- 7. Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
- 8. The spouse of any individual listed above.
- 9. First cousin.
A change of Beneficiary might have significant gift tax or generation-skipping transfer tax consequences. You should consult with a tax advisor prior to changing the Beneficiary of your Contract.