question about 529 plans - in two different states - and lifetime limits

[Anonymous]

We have a 529 account set up for our DD in Washington DC. Grandpa has a 529 account set up for the same DD in Nebraska. I understand that there are lifetime limits for 529 accounts. The lifetime limit in DC is $260,000. In Nebraska it is $360,000.

Do we combine the values of both accounts to determine whether we've met the lifetime limit for DC? Or can we theoretically save up to $260,000 in the DC account and Grandpa can save another $360,000 in the Nebraska account, and our kid can use all that money to fund college and graduate school?

And what happens if we manage to save $200,000 in the DC account but then its earnings bring it over the $260,000 limit?

This is all wishful thinking but I'd like to understand how the lifetime limits work, and whether we have to take both accounts into consideration when determining if we are close to the lifetime limit.

[Anonymous]

Ah, I hadn't thought to check the lifetime limits for ours!

Won't those limits keep going up to match the rising costs of tuition? So it's 260k now, will probably be double that by the time my kid is in school - right? Or are they slow to up the limit?

[Anonymous]

Once you hit the lifetime limit on 529s, you can't make any more contributions, but the account can continue to grow from earnings. And, in most cases, the limits do not cross state lines. So DC's 529 only counts DC accounts for the limit - in other words accounts held by you and your spouse for DD are added together to count toward the limit. DC doesn't care about grandpa's Nebraska account but I don't know whether Nebraska cares about yours in DC.

At those account levels, the other consideration is triggering the gift tax.

[Anonymous]

Per gift tax consideration, 529s allow a 5-year advancement on lump-sum contributions to avoid gift tax. This year, the number is $14K which means you can contribute $70K at once ($140K for married couples) without incurring a gift tax. You can not, however, contribute to those plans for the 5 years after the initial lump sum contribution.