Multiple 529 accounts might be used to help resolve problems with the annual gift tax exclusion. In 2002, you can give away up to $11,000 worth of assets to any number of recipients, tax-free, because of this exclusion; for married couples, the limit is $22,000 per recipient.
Suppose you’d like to contribute $10,000 to a 529 account for your son this year. However, you’ve already given him $7,000 this year so you have only $4,000 of gift tax exclusion remaining for 2002.
You can make a special election, available for 529 plans, to spread the gift over more than one year, up to five years. You’d make this election on a gift tax return.
Alternatively, you can contribute $4,000 to a 529 account for your son, which will be covered by the gift tax exclusion, and another $6,000 into a 529 account where you name yourself as the beneficiary. In a later year, if there is unused gift tax exclusion, funds may be transferred from the self-beneficiary account to the child-beneficiary account.
Either way, the entire $10,000 will be in a tax-free 529 environment.
