Greetings Tricia,
Thank you for visiting the Disney Parks Moms Panel with your question. What a magical gift to your son!
You are certainly correct, if you purchase him an Annual Passport and your son wishes to upgrade to a different passport, all he will need to do is pay the difference of the upgraded Annual Passport.
Having an Annual Passport is such a great benefit with valuable discounts, offers, and special invitations to Passholder events. Upgrading a passport will also mean fewer blockout dates which means more days for your son to enjoy pixie-dusted visits!
Just stop by any Theme Park Main Entrance Ticket Booth to upgrade the passport, at that point, he will pay the full difference between the current Annual Passport and the upgraded Annual Passport. The pass is instantly upgraded along with all the new benefits. However the expiration will remain the same.
Happy Disney Park Hopping!
~ Lynette