Lynn Brenner Lynn Brenner

Brenner answers questions about all aspects of family finance.

I have three grown children, each of whom has children. I opened a New York State 529 College Savings Plan for the oldest child in each family. Can that money be divided among the siblings in each family, or must I open a 529 account for each child? Can I add new grandchildren to the same 529 account, or do I have to open separate ones?


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The cleanest strategy is to open an account for each child. You can do that with a $25 deposit (or just $15 if you use payroll deduction).

As the 529 account owner, you can change its beneficiary designation from one sibling to another, or transfer money between 529 accounts whose beneficiaries are siblings, or split one 529 account into two accounts -- but it's extra work. Let's say you intend to use one account for John and his sister Mary, but only John is a named beneficiary. You won't get a tax break on withdrawals used for Mary's college expenses unless you first change the beneficiary designation from John to Mary. (The 529 plan account withdrawals are free of federal tax -- but only if you use the money to pay for the beneficiary's qualified educational expenses.)

Having an account for each child lets you use the 529 plan's "age-based" investments, which automatically grow more conservative as the beneficiary nears freshman year. (Separate accounts also let you take full advantage of the annual gift tax exclusion: You can give up to $13,000 per recipientper year with no gift tax consequences.) And, of course, with separate accounts, you never have to explain that some of John's money is actually for Mary.

The bottom line It's sensible to name each child you're saving for as a beneficiary on his or her own 529 account.

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