Google is giving me contradictory info so I thought I'd see if anyone here can help.
The situation
Alice and Bob used a 529 to save for their child Casey's college. Casey ended up getting enough scholarships that there's plenty left over (let's say $50k). Casey now has a baby, Danny. Alice and Bob, loving and devoted grandparents, would like this 529 to become a college fund for Danny.
The questions
[1] Can Alice and Bob change the beneficiary from Casey to Danny without tax consequences?
[2] Can Alice and Bob change the owner from themselves to Casey without tax consequences?
[3] Does changing the beneficiary count as Casey making "a gift" to Danny (some Google results say this is true) and if so... does it matter? (Nobody here has an $11 million estate.)
[4] If no tax consequences, is there any reason not to change both the owner and the beneficiary at the same time?
Numbers added for reference.
1. Yes.
2. Yes.
3. No and n/a.
4. Not in the situation you describe. The owner controls and is responsible for the money, and the beneficiary is the one whose qualified educational expenses count for tax-free withdrawals, so they're independent decisions and can be treated independently. So for example if Casey might go to graduate school and might use that 529 money for that purpose, Casey could receive ownership of the account from Alice and Bob but not change the beneficiary for a while.
Note that there is a "scholarship exception" to the 10% penalty, so the owners of the account (either Alice, Bob, or Casey, as the case may be) can withdraw any amount of the 529 up to the amount of scholarships received by Casey without paying the 10% penalty. The beneficiary would owe ordinary income taxes on the earnings portion of the withdrawal.
Also, I believe the proper term for Alice or Bob is custodian, not owner.
Pub 970 at irs.gov should back up all of my answers. 529's are a kind of Qualified Tuition Plans in IRS terminology, so they are mostly covered in chapter 8.
https://www.irs.gov/pub/irs-pdf/p970.pdf