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Can a 529 have multiple beneficiaries?

December 16, 2018

If you have more than one child, you may be wondering if you can set up one 529 plan for all of your children to use. The short answer is no. You cannot designate multiple beneficiaries on a single 529 plan. However, there are a variety of other strategies you can use to provide 529 funds for all of your children.

Alternatives to Designating Multiple Beneficiaries

Changing the Beneficiary

Scenario: You have two kids, Marlo 18, and Alex, 4. When Marlo graduates college, Alex will be 8, and you’ll have ten years to save for Alex’s college education.

In this case, after Marlo graduates college, you can change the beneficiary to Alex. If your children are more than four years apart, especially if there’s a long gap allowing you to replenish the account after the first child completes their degree, this may be the best option. Be sure to take into account how your portfolio is structured, and adjust any age-based investments when you change the beneficiary.

Multiple Accounts

Scenario: You have triplets Stan, Stacy, and Starla, and you want to save for each child’s college education.

Since all of your children are the same age and will likely be attending college at the same time, it makes sense to have separate accounts for each child. Contributions are simple, as you can contribute equally to each 529 plan and expect to see similar growth. You can also avoid the gift tax, by contributing $15,000 ($30,000 if husband and wife contribute $15,000 individually to each child).

Benefits of Having Multiple Accounts

Avoid Gift Tax

With separate accounts for each child, you can donate the gift limit ($15,000 per person) to each account without taxes.

Take Advantage of State Tax Deductions

In some states, you can take a deduction for each 529 plan that you manage. Having multiple accounts would mean a deduction for each child. Consult with your plan administrator to find out if your plan permits this option.

Age-based Investments

Most investment portfolios are modeled on age-based investments, taking the beneficiary’s age and college start date into account. If you have one account with multiple beneficiaries, an age-based investment would work for the first child but could minimize the earnings impact for subsequent beneficiaries. By maintaining separate accounts, each child’s plan can take advantage of the age-based investment model without adverse consequences.

Better Records and Organization

Keeping a separate 529 account for each child makes record keeping more manageable, especially during tax time.

Transfer Money Between 529 plans

Another benefit of having multiple 529 accounts is that you can move money from one 529 account to another needed. As your oldest child approaches college, if you need additional funding to cover expenses, you can transfer money from your youngest child’s account. On the other hand, if your oldest child is nearing the end of their post-secondary studies, you can transfer the remaining funds to a 529 account for a younger child.

Although you cannot have multiple beneficiaries with a 529 plan, having a separate account for each child may prove a better option for you in the long run. If you’re unsure about which options are best for you, you can consult with a tax professional to determine how to maximize your tax benefits and investments.