Onward Intel: The 411 on Multiple 529s
Subhed: If there are multiple children, does the ownership for all 529 plans have to go to the same parent?
No, the ownership of the 529 plans for multiple children does not have to go to the same parent. Each 529 plan is typically set up for a specific beneficiary (child), and the account ownership can be assigned individually for each child. Here are 5 ways to handle the ownership of 529 plans when there are multiple children involved:
1. One Parent Retains Ownership of All 529 Plans
One parent could retain ownership of all 529 plans for the children. This can be simpler administratively, but it may not feel equitable to the other parent, especially if they wish to have more control over contributions or withdrawals. In this case, the agreement should specify how contributions will be handled and whether both parents will be responsible for making future contributions.
2. Each Parent Retains Ownership of Specific 529 Plans
Each parent could keep ownership of the 529 plans for the children they feel most closely connected to, or by agreement, each parent could retain ownership of the 529 plans for their respective children. For example, Parent 1 could retain ownership of the 529 plan for Child 1, while Parent 2 retains ownership of the 529 plan for Child 2. The other parent may still contribute to the plan, but they wouldn’t have control over it. This ensures both parents have a stake in the children’s educational savings.
3. Split Ownership Between Parents for Different Children
If there are multiple children, you could also split ownership of each 529 plan based on who has legal or financial responsibility for each child. For example:
- Parent 1 could own the 529 plan for Child 1, and Parent 2 could own the 529 plan for Child 2.
- Both parents could agree to contribute equally or according to their ability to do so.
4. Setting Up Separate 529 Plans for Each Parent
If there is a desire for each parent to contribute and have control over their portion, you could split the 529 funds by setting up separate plans for each child, allowing each parent to manage their own plan for their children. This could help keep things separate and organized, especially if parents don’t trust each other with managing the accounts.
5. Consideration of State Laws and Tax Implications
In some states, the division of assets in a divorce might require one parent to relinquish certain assets, which could impact the ownership of the 529 plans. It’s important to consider any tax consequences for both parents if they are splitting or transferring ownership of these accounts.
What to Address in the Agreement
- Ownership: Who will own each 529 plan? Will the ownership be assigned based on the child, or will one parent control all plans?
- Contributions: Will both parents continue contributing? How will future contributions be handled?
- Usage of Funds: How will funds be used for the child’s education, and who will make the decisions regarding withdrawals?
- Tax Implications: Clarify who will benefit from any tax deductions or credits associated with 529 contributions.