The short answer is yes, the same child can be the beneficiary of multiple 529 plan accounts. If several people — parents and two sets of grandparents, for instance — want to help fund a child's education, they can either contribute to a single 529 account, or set up separate plan accounts.
But looking at the same question another way: If you want to fund a child's education, should you open your own 529 account or contribute to an existing account? Three factors may affect your decision.
- The potential tax benefits of owning a 529
- What investment options each plan offers
- State maximums for 529 account balances
As the account owner, you control the assets and may get a state tax benefit from your contributions
"While several people may contribute to a single account, the person who sets it up is the owner and controls how assets are invested and when distributions are made to cover the beneficiary's education costs," says Richard Polimeni, director, Education Savings Programs at Bank of America.
The owner can also
change the beneficiary to certain other family members of the current beneficiary, and the owner's contributions may qualify for a state income tax deduction. Grandparents who want the potential state tax benefit of contributions and greater control of the assets might prefer
funding their own 529 for your child. Depending on state law rules regarding contributions to a 529 account, non-owner contributors also may be entitled to a deduction.
"Grandparents who want the potential state tax benefit and greater control of the assets might prefer funding their own 529 plan for your child."
— Richard Polimeni, director, Education Savings Programs, Bank of America
Separate 529 plans can be invested differently
Every state chooses a program manager for its 529 plan and decides which investment options it will offer. "You can choose a plan from your state or a different one, and although most plans give you widely diversified investments to choose from, having accounts in multiple 529 plans for the same beneficiary could increase the mix of investments or let you select different kinds of assets," Polimeni says.
Having 529 accounts in multiple states may help you invest and contribute more
While 529s have high per-beneficiary account balance maximums — generally ranging from $300,000 to well over $500,000, depending on the state that sponsors the plan — you might want to invest even more between several family members. The maximums apply to the combined balances for the same beneficiary of all accounts in one state's 529 plan. So if you and a grandparent, say, each establish a 529 for your daughter in your home state, total contributions to both accounts can't exceed that state's limit.
But if one or both of you opens additional accounts for your daughter in another state, contributions there are capped only by that state's maximum. You might be able to invest $300,000 in each state, for example, providing $600,000 to help fund the child's education.
The maximum account balance allowed in a 529 plan is determined by the state in which the account is opened. This graphic clearly highlights which U.S. states allow 529 owners to invest the most — and the least — amount of money in their 529s. For instance, California's $529,000 maximum balance is the largest in the U.S., while Georgia and Mississippi each have a maximum 529 balance of $235,000 — the lowest in the country.