CHANGE OF BENEFICIARY.

(a) The purchaser of a prepaid tuition contract may designate a new beneficiary instead of the original beneficiary if the new beneficiary meets the requirements of a beneficiary on the date the designation is changed. Except as provided by Subsection (b), the new beneficiary must meet the requirements of Section 529 of the Internal Revenue Code of 1986 so that the change of beneficiary is not treated as a distribution under that law.

(b) If the purchaser is this state, a local government of this state, or an organization exempt from taxation under Section 501(a) of the Internal Revenue Code of 1986 because it is listed in Section 501(c)(3) of that code that purchases an interest in a prepaid tuition contract as part of a scholarship program operated by the government or organization, the purchaser may designate a new beneficiary without regard to the relationship of the new beneficiary to the original beneficiary.

(c) The board may adjust the terms of the contract so that the purchaser is required to pay the amount the purchaser would have been required to pay had the purchaser originally designated the new beneficiary as the beneficiary, taking into account any payments made before the date the designation is changed.

(d) The purchaser of a prepaid tuition contract may not sell the contract.