Can One Child Have Multiple 529 Accounts?

A 529 plan is a tax-advantaged savings vehicle for education expenses. Contributions grow tax-deferred, and qualified withdrawals are generally tax-free at the federal level. A common question is whether a single child can be the beneficiary of multiple 529 accounts, a flexibility advantageous for long-term educational funding.

Understanding the Rules for Multiple Accounts

A single child can be the beneficiary of multiple 529 accounts. This is possible because 529 plans distinguish between the account owner and the designated beneficiary. Parents, grandparents, other relatives, or even the adult beneficiary can establish separate accounts for the same child. Each account has its own owner, allowing different family members to contribute while maintaining individual control.

Accounts do not need to be with the same state’s 529 plan; an owner can open plans in different states for the same beneficiary. Some states offer different plan types, like prepaid tuition and savings plans, which can both be used. However, if multiple accounts of the same type are opened within the same state, they are aggregated for state-specific tax purposes.

Reasons for Establishing Multiple Accounts

Establishing multiple 529 accounts for one child offers several advantages. One is maximizing state income tax deductions, as different account owners may be eligible for deductions in different states. For example, parents and grandparents in different states, each offering a tax benefit, could open separate accounts to leverage incentives. Another motivation is to diversify investment strategies using different plans or options across various state offerings, allowing for varied asset allocations suited to different time horizons or risk appetites.

Multiple accounts also enable family members to contribute without pooling funds, maintaining individual control over contributions and investment decisions. Parents or other contributors might separate funds for distinct educational goals, such as K-12 tuition versus college expenses. This separation allows for different investment approaches based on varying timelines.

Key Considerations for Multiple Accounts

Managing multiple 529 accounts for a single beneficiary involves financial and administrative considerations. While no federal limit exists on the number of accounts, each state’s 529 plan sets an overall lifetime contribution limit per beneficiary that applies across all accounts. These aggregate limits range from approximately $235,000 to $575,000. Monitor total contributions to avoid exceeding them, which could have gift tax implications. Contributions to a 529 plan are considered gifts, and amounts exceeding the annual gift tax exclusion—$19,000 per individual donor in 2025, or $38,000 for married couples—must be reported to the IRS via Form 709, potentially utilizing a portion of the lifetime gift tax exemption. A special rule allows for a lump sum contribution of up to five times the annual exclusion ($95,000 for individuals or $190,000 for married couples in 2025) to be spread over five years for gift tax purposes.

The impact on financial aid is another consideration, though recent changes simplified this aspect. For federal financial aid, 529 accounts owned by a parent or dependent student are considered parental assets, assessed at a maximum of 5.64% of the asset value. Withdrawals from parent-owned 529 plans do not count as student income on the Free Application for Federal Student Aid (FAFSA). Starting with the 2024-2025 academic year, withdrawals from 529 plans owned by grandparents or other non-parent relatives no longer count as student income on the FAFSA, a change under the FAFSA Simplification Act. This adjustment removes a previous disincentive for extended family to contribute to a beneficiary’s education.

Coordinating distributions from multiple accounts ensures withdrawals are used for qualified education expenses to maintain their tax-free status. Qualified expenses include tuition, fees, books, supplies, equipment, and room and board for students enrolled at least half-time, as well as up to $10,000 annually for K-12 tuition. Careful record-keeping across all accounts is needed to track contributions, earnings, and distributions, avoiding non-qualified withdrawals subject to income tax and a 10% federal penalty on earnings. The administrative burden also increases with multiple accounts, as it requires tracking investments, statements, and communications for each separate plan.