Can You Start a 529 Plan Without a Child?

A 529 plan is a tax-advantaged investment account for saving for future education costs. Money in these plans grows free from federal tax, and withdrawals are also federal tax-free when used for qualified education expenses. This savings vehicle can be utilized for various educational pursuits, ranging from K-12 tuition to higher education at colleges, universities, trade schools, and apprenticeship programs.

Who Can Open a 529 Account

Anyone can open a 529 account, including parents, grandparents, other relatives, or friends. The account owner does not need to be related to the designated beneficiary. An adult can establish an account for themselves, another adult, or a future child.

The account owner must be a U.S. citizen or resident alien. While some states offer tax deductions or credits for contributions, these benefits often apply specifically to residents using their home state’s plan. Account owners are not restricted to their state’s plan and can open an account in any state’s 529 program.

Designating and Changing a Beneficiary

A 529 plan requires a designated beneficiary. The account owner can name various individuals as beneficiaries, including themselves, another adult (such as a spouse, relative, or friend), or a future child. The beneficiary must be a U.S. citizen or resident alien and possess a Social Security Number or Taxpayer Identification Number.

Account owners maintain control over the funds and can change the beneficiary at any time. A change of beneficiary to another qualified family member of the current beneficiary does not result in tax consequences. The Internal Revenue Service defines a qualified family member to include siblings, children, parents, stepparents, in-laws, first cousins, and their descendants. This allows for transfers, such as from one child to a sibling, or from the owner to a child, especially if the initial beneficiary receives a scholarship or decides not to pursue further education.

Steps to Open a 529 Account

Opening a 529 account involves selecting an appropriate plan. There are two types of 529 plans: direct-sold plans, offered directly by states, and advisor-sold plans, available through financial advisors. Direct-sold plans have lower fees, while advisor-sold plans may offer more investment options and professional guidance, though they come with higher costs. Compare fees, investment options, and potential state tax benefits before making a selection.

Once a plan is chosen, the application process requires personal information for both the account owner and the designated beneficiary. This includes their full names, addresses, dates of birth, and Social Security Numbers or Taxpayer Identification Numbers. Some plans may also request the account owner’s driver’s license number or state ID. Providing this information accurately is important for identity verification and account setup.

After completing the application, the next step is funding the account. Plans allow for an initial contribution, which can be as low as $10 to $25. Contributions can be made through electronic bank transfers or checks. Account owners can also set up recurring contributions, like automated monthly deposits, to build savings consistently. Plans also facilitate gift contributions from friends and family through specific gifting platforms.