A 529 plan can make the high cost of college more affordable, but there are some logistical considerations when it comes to getting the most out of them♋. Families with more than one child, for example, have to decide whether to use a single 529 plan for all of them or separate plans for each child. Having one plan could make saving for college simpler, but it could also limit financial benefits.

529 Plan Overview

A 529 plan is a tax-advantaged financial account that can be used to pay for 澳洲幸运5官方开奖结果体彩网:qualified higher education expense🌳s (QHEEs). A 澳洲幸运5官方开奖结果体彩网:handful of states offer prepaid tuition plans, a type of 529 plan that can be used to pay college tuition at today’s rates for select schools. With the more common college savings plan, contributions grow tax-deferred, and withdrawals are tax-free (so long as they’re for eligible expenses). If these funds are used for non-qualified expenses, then the earnings will be subject to income taxes and an additional 10% penalty.

While 529 plans were created by Congress in 1996, each one is administered by an individual state, and so the exact details and tax benefits can vary between plans.

A 529 plan has both an account owne🐷r and a beneficiary. These could be the same person, such as a prospective college student opening their own 529 account. Typically, however, the account owner is a parent or grandparent who makes contributions to the account on behalf of their child or grandchild, respectively.

Another important aspect of 529 plans is that their use cases have expanded beyond just paying for college. For example, as part of the 2017 Tax Cuts and Jobs Act (TCJA), 529 plans can be used to pay for up to $10,000 per year for K–12 tuition.

How Many 529 Plans Should a Family Have?

If you have multiple child🐟ren, it may seem easier to have a single 529 plan, but having separate ones can be more practical, depending on your perspective.

"Philosophies will vary from family to family. I've found parents like seeing൲ different accounts for different children; that way they can gauge whether they are on t🔯rack or behind for a particular child's education needs," said , a financial advisor at Edward Jones.

Plus, having 529 plans for each child can help prevent confusion. If you only have one 529 plan but have multiple children in college at the sam🍨e time, "it can be administratively complicated to keep switching the beneficiary back and fo𒊎rth," said , senior director of college finance at Bright Horizons College Coach.

Of course, if your children won’t overlap during their coll☂ege year💧s, “the administrative burden is minimal, but the larger issue is that you may want to be invested differently based upon each child’s age,” Vasconcelos added.

However, there are times when just limiting yourself to one 529 plan can pay off. For example, having a single account can make it easier to spend down those funds. If your oldest child goes to an inexpensive schoolꦇ, then after they graduate, you could change the beneficiary to the next child in line to attend college. This way you won’t have to worry about managing both plans and 𒈔potentially paying an additional account maintenance fee. Similarly, changing the beneficiary could also be useful if the original one decides to drop out of college or skip it altogether.

"The real advantage to having one combined 529 for all of your children is simplicity. You only need to look at one account to see the whole of your college savings. Some parents prefer this holistic view," said Vasconcelos.

How to Change a 529 Plan's Beneficiary

The actual process of changing a 529 plan 澳洲幸运5官方开奖结果体彩网:beneficiary is relatively straightforward. Usually you’ll just have to fill out some paperwork with the required information, such as the current and former beneficiaries’ names and Social Security numbers (SSNs). How you access said paperwork can vary by state;⛎ sometimes you’ll be able to download the necessary forms online, and other times you’ll have to request physical copies via the mail.

While there are no direct tax consequences to changing beneficiaries, it could incur gift tax consequences.

Pros and Cons of Using a Single 529 Plan

Pros Explained

• Streamlined oversight: Having a single 529 account streamlines plan management. You’ll only receive statements from one account versus multiple, for example, and you can easily track account growth.
• Investment efficiency: Having one 529 plan should make planning investments much simpler. For example, if you're going to contribute $5,000 per year, you won’t have to split that into multiple deposits across separate accounts with different investment selections.
• Easier to use up funds: By having one account for multiple children, it can potentially be easier to use up all the funds for qualified expenses. If you have a separate 529 plan for a child, it can be difficult to use the funds if the child decides to not go to college.

Cons Explained

• Complexity of changing beneficiaries: Changing beneficiaries requires extra paperwork, and it can be difficult to figure out how to handle situations like when two kids need to withdraw funds from the account at the same time.
• Difficult to plan for each child's specific needs: With one 529 plan, it can be hard to determine whether each child is on track to have sufficient funding for college, and you can only really tailor 澳洲幸运5官方开奖结果体彩网:investment strategies for one child at a time.
• Financial aid complications: Having one 529 plan could complicate qualifying for financial aid since if the parent is the account owner, it could seem like one child has access to more assets, even if some of that money is earmarked for their siblings. "You don’t want college savings for all of your children in that one child’s name," said Vasconcelos.

How to Manage One (or More) 529 Plans

If you have or are thinkin𓄧g of getting a single 529 plan for your family, then consider how to best manage this account such that it can support multiple children, not just the initial beneficiary.

For example, using investment vehicles like 澳洲幸运5官方开奖结果体彩网:target-date funds (TDFs) within a 529 plan can help you allocate money for different investment strategies that align with each child’s expected year of enrollment, Esser noted. Additionally, keep in mind that you’ll only be able to exchange assets within the account just twice per year (or whenever you change to another eligible beneficiary).

Moreover, you need to plan ahead for how you're going to make the money last for more than one child.

"I would advise doing a mental accounting to ensure your savings can support all of your children relatively equitably. You don’t want to spend down your entire 529 for your first child and have nothing left for your next child, limiting their college options in a way that was not done for your first child," said Vasconcelos.

If you instead decide that having separate 529 plans is the right thing to do for your family, then it's still worth looking into state-specific plan rules and considering how to best allocate funds to each plan so all of your kids can afford to go to college. 

"Proper care and thoughtful execution needs to be at the forefront of any education strategy," Esser added.

Non-Education Alternatives for 529 Plan Funds

While having one 529 plan can help you avoid instances where multiple accounts end up with leftover money, it's important to remember that there are other ways you can use those funds.

In particular, the Setting Every Community Up for ꩲRetiremen🐽t Enhancement (SECURE) Act of 2019 allows for a lifetime maximum of $10,000 to be used to pay off the beneficiary’s student loans. Notably, this law also permits the same amount of money to be put toward each of the beneficiary's siblings' student debt, without changing the beneficiary.

Additionally, thanks to the 澳洲幸运5官方开奖结果体彩网:SECURE 2.0 Act of 2022, a lifetime maximum of $35,000 can be rolled over from a 529 plan into the beneficiary’s Roth IRA. However, the 529 plan must have been open for at least 15 years.

The Bottom Line

Overall, whether you use a single 529 plan or multip💙le to help your children save for college, each option has its advantages and disadvantages.

In general, using one plan simplifies s🎀ome of the administrative aspects, but changing the beneficiary can be time-consuming and potentially confusing. Having separate 529 plans has the benefit of making it easier to monitor progress and delineate investment strategies for each child. However, there’s also greater ꦏrisk that some of those funds will end up going unused.

Co✅nsider consulting with a financial advisor to help you determine the best option for your financial situation.