The gift occurs when you fund the 529 for a particular beneficiary. Up to 14k/year each kid, no problem, due to annual exclusion. That's the simple story -- can also bunch multiple years' exclusions and use them all in 1 year (but then not in later years), and can gift-split to use both spouses' exclusions.

I'm confused, PP. How does gift tax come into play? DO you have to pay gift tax when you use the 529 funds to pay the tuition?

Federal gift tax annual exclusion (currently $14K) applies on a per-donee basis, so you need separate plans with separate beneficiaries to take full advantage of the exclusion.

Also, there is a limit on the size of a 529 account based on "reasonable needs of the beneficiary" or similar language to that effect (federal rule, implemented by caps in state plans, e.g., $350K in VA).

What state are you in? In MD, they have a specific plan that's very tax-efficient 529 plan if you're in-state: http://www.collegesavingsmd.org/college-investment-plan-overview.aspx?page=interior

Not sure if this applies to all states, but in DC you can deduct the first $4k of contributions from state taxes per person. You are only able to have one person as the owner of each account, and one beneficiary (though you can change the beneficiary). My oldest's 529 is in my name and the $4k deduction is nominally "mine" (though we file join and my husband has an account in his name with our youngest as the beneficiary so that he can also claim the $4k deduction. As I understand it having two accounts is the only way to claim $8k deduction per couple.

Some people recommend multiple accounts in case you need to withdraw some for non-college expenses (you could withdraw from the account with less gains in it, so you have less taxes).

Assuming the kids are of different ages, you'd want two accounts because you'd want to assume different risk/tolerances over time.

I.e. Kid 1 might be aggressively invested until they 2020, kid 2 might be aggressive until 2024.

Is this what everyone does?

Otherwise, would there be any reason not to keep a single account (happens to be in the older child's name) and invest all the money into that account? Hoping that someone with more knowledge of fee structures, as well as logistics once the children near college age, could weigh in.