Can a Child Have Multiple 529 Plans?

Saving for higher education is a significant financial goal for many families. 529 plans are popular, tax-advantaged tools offering tax-free growth and withdrawals for qualified education expenses. A child can indeed be the beneficiary of multiple 529 plans.

Understanding Multiple 529 Plan Ownership

A child can be the beneficiary of several 529 plans simultaneously because ownership is distinct from the beneficiary. Different individuals, such as parents, grandparents, or other relatives, can open separate 529 accounts for the same child. For example, parents might establish one plan, while grandparents contribute to another.

These plans do not need to be based in the same state. An account owner can choose a 529 plan offered by any state, regardless of their residency or the beneficiary’s location. This flexibility allows families to select plans with varied investment options, lower fees, or specific state tax benefits.

Navigating Contribution Limits and Tax Rules

Understanding federal contribution limits and tax implications is important when a child benefits from multiple 529 plans. The Internal Revenue Service (IRS) does not set an annual contribution limit, but contributions are considered gifts for federal tax purposes. In 2024, individuals can contribute up to $18,000 per beneficiary without triggering federal gift tax implications or requiring a gift tax return; this increases to $19,000 for 2025.

This annual gift tax exclusion applies per donor per beneficiary across all plans. For instance, if three separate individuals contribute to a child’s three 529 plans, each can gift up to the annual exclusion amount without tax consequences. Married couples can collectively contribute up to twice the individual exclusion amount ($36,000 in 2024, $38,000 in 2025).

For larger sums, “superfunding” allows up to five years’ worth of contributions in a single year. An individual could contribute up to $90,000 in 2024 (or $95,000 in 2025), with married couples contributing double, provided no further contributions are made for the subsequent four years. This strategy requires filing IRS Form 709 to inform the IRS of the election.

While annual contributions are subject to gift tax rules, state-specific lifetime contribution limits apply per beneficiary across all 529 plans. These aggregate limits, set by individual state plans, typically range from $235,000 to over $597,000. All contributions for a specific beneficiary, across all 529 plans, are aggregated towards this state-specific maximum. If this limit is reached, no further contributions can be made to any 529 plan for that beneficiary.

Practical Considerations for Multiple Plans

Managing multiple 529 plans for a single beneficiary introduces several practical considerations, particularly concerning financial aid eligibility and administrative oversight. For financial aid purposes, the treatment of 529 funds on the Free Application for Federal Student Aid (FAFSA) depends on the account owner. Parent-owned 529 plans are typically assessed as a parental asset, with a relatively small percentage (up to 5.64%) counted toward the Expected Family Contribution (EFC).

Significant changes under the FAFSA Simplification Act, effective for the 2024-2025 academic year, have altered how non-parent owned 529 plans are treated. Distributions from grandparent-owned 529 plans, or those owned by other non-parents, are no longer reported as untaxed student income on the FAFSA. However, some private institutions use the CSS Profile, which may still consider these funds.

Strategically, families might establish multiple plans to diversify investment managers or pursue different investment strategies across accounts. Some families also benefit from varying state tax deductions or credits offered by different state 529 plans, leveraging these incentives based on the account owner’s state of residence. Careful administrative tracking of contributions and withdrawals across all accounts is necessary to ensure compliance with federal gift tax rules and state-specific lifetime contribution limits. Account owners should maintain thorough records to avoid exceeding limits and to facilitate accurate tax reporting.

Should circumstances change, funds can be rolled over from one 529 plan to another for the same beneficiary once every 12 months without tax penalties. This flexibility allows families to consolidate accounts or move funds to a plan with more favorable features. Additionally, recent legislation permits a tax-free rollover of up to a lifetime maximum of $35,000 from a 529 plan to the beneficiary’s Roth IRA, provided the 529 plan has been open for at least 15 years and certain other conditions are met. This option offers a pathway for any unused education savings to contribute to the beneficiary’s retirement.