You may want separate 529 plan accounts for each child. Each 529 plan account can have only one beneficiary. Many investors who are saving for college choose to take advantage of age-based portfolio strategies for their accounts, which allocates the investments in the account based on the age of the child. For this reason, you may want separate accounts for children of different ages.
What if my child doesn’t attend college or I have money left in the 529 account?
529 plans offer significant flexibility should the designated beneficiary (student) decide not to attend college, or if the funds are not used for other qualified educational expenses. You can take out the money as a non-qualified withdrawal, but any earnings on non-qualified distributions are subject to federal income taxes at the recipient’s rate as well as a 10% federal penalty. You can also change the beneficiary on your 529 plan account to eligible family members of the original beneficiary without incurring federal income taxes and the 10% federal penalty.
Does a 529 plan affect financial aid eligibility?
529 assets may have a relatively small effect on federal financial aid eligibility because they are considered assets of the parent (participant) in the Expected Family Contribution (EFC). Conversely, accounts that are considered assets of the child (beneficiary), such as an UGMA/UTMA account, tend to have a greater effect on federal financial aid eligibility in the EFC calculation.