529 Plan FAQs

What better time to answer often-asked questions about 529 college saving plans than high school graduation season?

Common 529 Plan Questions

Who should own a 529 plan? Anyone can open a 529 (college savings) plan, but parents or grandparents are the most common account owners (with their children and grandchildren as the beneficiaries). Typically, accounts owned by parents hold an edge because nonparent accounts (including grandparents) can negatively impact the beneficiary’s financial aid eligibility. But thanks to changes coming in the 2024–2025 school year, grandparents will no longer have to worry about this financial aid trap.

Can I have more than one 529? You can open multiple 529 plans and several different account owners can contribute toward a single beneficiary’s education savings. In 2022, the gift-tax exclusion is $16,000 and (even better) 529 plans allow you to “front-load” five years of gifts—up to $80,000 per grantorThe creator of a trust who owns the assets to be transferred. per beneficiary. As such, this can be a powerful way for parents or grandparents to distribute their living legacy and move assets out of their estate.

Can you change the beneficiary? Account owners can change the beneficiary so long as the new recipient is in the same family as the original beneficiary. For instance, if you set up a 529 plan for your eldest child and there are funds left over, the IRS allows one tax-free plan-to-plan rolloverThe process of transferring funds from one retirement account to another, typically without incurring a tax. (to another eligible family member) per 12-month period.

What if I overfund my 529? In addition to changing the beneficiary, families can also take tax-free withdrawals up to $10,000 to pay for K–12 education, vocational school tuition and even student loans. This includes apprenticeships and other professional training programs. Nonqualified expenses may also be withdrawn (and will have grown tax-deferred), but the benefit may be canceled out by federal taxes on the account earnings plus an additional 10% penalty. One exception: If your child receives a scholarship, withdrawals up to the amount of the scholarship will not incur the 10% penalty for nonqualified education expenses.

If you have additional 529 plan questions, there are many intricacies to your options, so don’t hesitate to call us. After all, we’re The Planner You Can Talk To!

About Adviser Investments

Adviser is a full-service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process., institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868.