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CAUTION

The limit of one rollover during any 12-month pe- riod doesn't apply to the rollover of a military death gratuity or SGLI payment.

Changing the Designated Beneficiary

The designated beneficiary can be changed. See Mem- bers of the beneficiary’s family, earlier. There aren’t any tax consequences if, at the time of the change, the new beneficiary is under age 30 or is a special needs beneficiary.

Example. Assume the same situation as in the last example (see Rollovers , earlier). Instead of closing your Coverdell ESA and paying the distribution into your sibling’s Coverdell ESA, you could have instructed the trustee of your account to simply change the name of the beneficiary on your account to that of your sibling.

Transfer Because of Divorce

If a spouse or former spouse receives a Coverdell ESA under a divorce or separation instrument, it isn’t a taxable transfer. After the transfer, the spouse or former spouse treats the Coverdell ESA as their own.

Example. In their divorce settlement, Taxpayer A received Taxpayer B’s Coverdell ESA. In this process, the account was transferred into Taxpayer A’s name. Taxpayer A now treats the funds in this Coverdell ESA as if they were the original owner.