Q. if I sell that fund does that mean I have to file a return for my child regardless if the earning were less than $1,100 because its considered a trade of assets?
A. No. The $1100 rule still applies regardless of whether the unearned income is from sale of assets or interest, dividends or capital gains distributions. All the asset sale changes is you ability to file your kids income on your own return*.
"I was thinking about selling the fund and going to cash for our kids so I don't have to deal with filing returns in the future." Not a good reason. You could use the TurboTax Free file edition.
Here's something you may want to consider: https://www.merrilledge.com/ask/college/can-you-transfer-funds-from-529-plans
*If the child's only income (including custodial accounts) is from interest and dividends, Alaska PFD or capital gains distributions shown on a 1099-DIV, there is a provision for entering it on your return, using form 8814.
