Should You Have a Single 529 Plan for Multiple Children?

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By Mark Kantrowitz

August 20, 2020

Parents often ask whether a 529 plan can have multiple children as beneficiaries or do you open one 529 plan per child. It is best to open a separate 529 college savings plan account for each child. A 529 plan can have only one beneficiary.

Reasons for Having Just One 529 Plan for Multiple Children

The usual reason for having a single 529 plan – minimizing the annual account maintenance fees – doesn’t really apply any more. Most 529 plans do not charge an account maintenance fee. Most of the other 529 plans will waive account maintenance fees for state residents, investors who satisfy minimum balance requirements, investors who sign up for automatic investments, and investors who agree to receive account statements using electronic document delivery.

Another argument – that it is easier to use leftover money for another child – also isn’t compelling. You can move money from one 529 plan to another if one child goes to a less expensive college or doesn’t go to college and has money left over in their 529 plan.

If you decide to have only one “master” 529 plan account for all the children, you will need to change the beneficiary before each distribution. The tax-free distributions will then be justified by each child’s qualified education expenses. 

Alternately, you could transfer a portion of the funds to a new 529 plan for each child when that child is ready to enroll in college. That kind of defeats the purpose in having a single 529 plan.

See also: When You Should Not Change Your 529 Plan Beneficiary

Advantages of Having One 529 Plan Per Child

There are several reasons why having separate 529 plans is a better strategy.

  • Customize asset allocation based on child’s age. You can tailor the mix of investments based on the age of each child. Younger children have a longer time horizon before they enroll in college, so they can have a more aggressive mix of investments than older children. Most 529 plans offer age-based investment glide paths that base the asset allocation on the age of the child. That does not work as well when multiple children will be using a single 529 plan. 
  • Who do you love more? If you have only one 529 plan, the children who aren’t beneficiaries of the 529 plan will wonder whether you intend to send them to college.
  • Larger limits on 529 plan contributions. You will be able to save more with multiple 529 plans for multiple children. If you have just one 529 plan, you will be limited to a single aggregate contribution limit, instead of having a separate limit apply to each child’s 529 plan.
  • Larger annual gift tax exclusion. The annual gift tax exclusion for contributions to a 529 plan assumes a single beneficiary per 529 plan. So, you will be limited to contributing just $15,000 per year ($30,000 if you give as a married couple). Having a 529 plan for each child lets you contribute more money, up to the annual gift tax exclusion per child each year. 
  • Large state income tax breaks. In some states, the contribution limit on the state income tax deduction or tax credits is per beneficiary, not per taxpayer. So, having one 529 plan per child will let you claim a larger state income tax break than if you have just one 529 plan. 

There are also other advantages to maintaining separate 529 plan accounts for each child.

A good place to start:

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