Maintaining a single 529 account for multiple children offers a couple of potential benefits. You may be able to reduce your annual costs by consolidating your college savings into one account; keeping the 529 funds with your youngest child may increase the older children’s chances for favorable financial-aid treatment.
On the other hand, it makes more sense to open a separate 529 account for each child, for these reasons:
- You can contribute more without worrying about gift tax. A $25,000 contribution to one account will require that you file a gift-tax return because it exceeds your $11,000 annual gift exclusion.
- If spread evenly among three 529 accounts, that same $25,000 becomes three separate gifts of $8,333, falling within your $11,000 gift allowance for each child. No gift-tax returns are needed, provided other gifts don’t push any recipient over the annual exclusion limit.
- You may wish to invest differently for each child. For the oldest child, you might want to be more conservative while investing more aggressively for younger children.
- Some states offer a tax deduction or a match for your contributions on a per-beneficiary or per-account basis. Multiple accounts could lead to multiple deductions.
