Can I Have More Than One Child as a Beneficiary to a 529 Plan?

Wondering if you can use your existing 529 plan to pay for all your kids’ college expenses?

The bad news: you can’t.

You can only have one child as a beneficiary on a 529 plan. However, there are some ways you can use 529 plans to help all your children save for college. Read on for more about your options!

Alternatives to Adding a 529 Beneficiary

While having more than one child listed as a beneficiary on a 529 plan isn’t allowed, you could take a different approach. Consider the following: 

Change The Beneficiary

You are allowed to change the beneficiary of your 529 plan at any time.

Let’s say your two kids are more than 4 years apart. Once one child graduates from college, they won’t need to use the funds in your 529 plan anymore and you can simply change the beneficiary to your second child.

As long as you continue using your 529 college savings plan to support people in your family, you can simply change the beneficiary of your plan to the child who needs it. Added bonus, it shouldn’t have tax consequences, either.

Create a 529 for Each Child

While your 529 plan can only have one beneficiary, there’s no reason you can’t have more than one 529 plan. Plus, one child can be the beneficiary on multiple 529 plans, so there’s really no downside. If one child does not use up all the funds in their 529 plan, you can simply change the beneficiary to your other child.

On another note, you can only change 529-related investments twice within a single year. This means that having a plan for each child (or just not one plan for both kids) is ideal if your children are close in age and you want to make an investment change post-graduation for one but pre-enrollment for another.

There are some ways around this twice-per-year rule, too.

When Changing the 529 Beneficiary Makes Sense

Setting up a single 529 plan and changing the beneficiary as needed can be a great strategy. Again, this is a straightforward way to keep using the same 529 plan, even after one child completes their college education. 

Because this only involves a single account, it can make life easier for you in other ways, too – you’ll find it easier to plan yearly investments, and withdrawals should also be a breeze. If your children are close in age and thus have the same investment allocation, a single account can make it easier to manage the portfolio. 

When You Should Create a 529 for Each Child

Asset Allocation and Age

Saving for college isn’t one-size-fits-all, and you’ll need to consider how the ages of your children will affect your investment strategy. Since younger children have a relatively long time before college, their 529 plans can take advantage of riskier investments compared to those set up for older children. 

In fact, most 529 plans today feature investment glide paths where asset allocation is based on the beneficiary’s age. That can be convenient when these plans are meant for a single beneficiary. 

Taxes and Contribution Limits

Though they’re primarily designed to benefit your children, 529 plans can have some perks for you, as well. These plans come with an annual gift tax exclusion of up to $18,000 per year in 2024 (or $38,000 if you contribute as a married couple and “split gifts”). With multiple plans, you can contribute up to that limit for each of your children every year.

In addition to this, 529 plans have a special “superfunding” rule that allows 5 years’ worth of contributions to occur in a single year. In 2024, the maximum funding a single parent could contribute to a 529 plan is $90,000 ($18,000 x 5). Two parents can simply double this and contribute $180,000 in a single year.

Note that any contributions over $18,000 in a single year should be filed on Form 709 to consent to “gift-splitting” which triggers the 5-year rule. There are generally no taxes due when filing this form, as long as you don’t go over the $90,000 single, or $180,000 married, contribution limit in 5 years, but filing Form 709 will essentially show what you did in the event of an IRS audit. Please be sure to consult your CPA or tax professional to ensure this is done correctly.

Do you live in a state where contribution limits on state income tax deductions/tax credits are per beneficiary? If so, having more than one 529 plan will allow you to claim a tax deduction per beneficiary on your state income tax.

Organization

Having a single 529 plan with multiple college-bound children means switching beneficiaries every few years–especially if you have more than two children who are close to the same age. This process is laborious and time-consuming. 

Managing 529 Accounts With the Pros

Establishing one or more 529 plans can be a fantastic way to plan for your children’s future. Still, it’s essential to know whether you should stick with a single plan and switch beneficiaries or set up multiple plans. That’s where the team at Consilio Wealth Advisors comes in. 

We believe the financial industry is made to be more complicated than it needs to be. That’s why we lose the jargon and offer transparent, straightforward advice based on your goals. We’ll help you track progress and be by your side helping guide you through your financial journey. Whether it’s retirement or a 529 plan, we’ll help you create the best strategy for you and your family. 

Disclosures

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Consilio Wealth Advisors, LLC (“CWA”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where CWA and its representatives are properly licensed or exempt from licensure.