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The problem with DD gifting the money to you to place in a 529 for her is that she is "incapable" of making that gift. That is, she doesn't have the legal capacity to make a gift.

I was involved in a recent discussion of this point elsewhere and learned that most, if not all, 529 plans have procedures for transfers from UTMA accounts. In effect, the 529 retains UTMA characteristics until the beneficiary reaches majority.

My language was imprecise. I meant to address the issue of transfering the funds to a 529 owned by the parent, not a custodial 529.

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