By the time your 5yo is in college, you’ll have a better idea of whether your 4mo is on a college track and can adjust
at that point. Also, the 529 isn’t only for 4 year colleges. Community college and vocational schools are also eligible.

If the beneficiary is disabled or dies, the withdrawal penalty is waived-you just pay taxes on the income. Likewise, if one gets scholarships, you can get the penalty waived on a portion equal to the scholarship amount.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Ok but still, what if one child does not pursue any schooling beyond highschool, has a serious illness or adverse event? Do you not worry about being able to access that money for other needs if you had to? I feel like I'm playing an odds game which hopefully turns out fine, but want to be realistic about all possibilities.

You still get the money, they just recapture the tax benefit if it’s not used for qualified educational expenses. And maybe a small penalty? I’m not sure about that. But it’s not like the money is gone. Your concerns are a bit odd, op. Just put in the amount to get the tax benefit and no extra then.

The penalty is 10% plus paying taxes on the earnings

You can change the beneficiary to a family member on the same "generation" of the family tree, so to speak, without taxes or fees. So it could be spent on educational expenses for a cousin of your child, for example.

https://www.irs.gov/newsroom/529-plans-questions-and-answers

"Q. Can I change the beneficiary of a 529 plan I have set up?

A. Yes. There are no tax consequences if you change the designated beneficiary to another member of the family. Also, any funds distributed from a 529 plan are not taxable if rolled over to another plan for the benefit of the same beneficiary or for the benefit of a member of the beneficiary’s family. So, for example, you can roll funds from the 529 for one of your children into a sibling’s plan without penalty."

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Keep in mind that all accounts a parent has count against the financial aid for each child. For instance, we have two accounts - one for each kid - but the assets in both accounts counted against the oldest in his financial aid calculations. That's because the beneficiary can be easily changed. Because we don't have enough in oldest child's account to fund the entire four years, we are going to tap his brother's account so that is reduced and brother eventually qualifies for more aid.

Also, do NOT put the 529 in your child's name. It counts against them more in financial aid considerations than when it's in your name. Ideally, your child should have NO money in their name when they apply for aid.

By this you mean don't make them the owner of the account, but it's ok for them to be the beneficiary, right?

Yes, make them the beneficiary, but not the owner.

Also, if grandparents open a 529 account then disburses to that child, the entire amount counts as income for the child, which hoses financial aid. Have grandparents contribute to the account the parent has set up. OR, have grandparents wait to give a big sum during the senior year after the last year of financial aid has already been calculated.

I don’t understand this. Why would the entire disbursement count as income for the child if the grandparents set it up as opposed to the parents? Why does it matter who sets it up as long as the child is the beneficiary and not the owner?

Because income of the student is reduces need-based eligibility more than the assets of the parents.

This explains it pretty well:
https://www.washingtonpost.com/news/get-there/wp/2018/05/24/should-grandparents-open-a-529-savings-plan-to-help-with-college-costs/?utm_term=.3d0f60d637bc

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Keep in mind that all accounts a parent has count against the financial aid for each child. For instance, we have two accounts - one for each kid - but the assets in both accounts counted against the oldest in his financial aid calculations. That's because the beneficiary can be easily changed. Because we don't have enough in oldest child's account to fund the entire four years, we are going to tap his brother's account so that is reduced and brother eventually qualifies for more aid.

Also, do NOT put the 529 in your child's name. It counts against them more in financial aid considerations than when it's in your name. Ideally, your child should have NO money in their name when they apply for aid.

By this you mean don't make them the owner of the account, but it's ok for them to be the beneficiary, right?

Yes, make them the beneficiary, but not the owner.

Also, if grandparents open a 529 account then disburses to that child, the entire amount counts as income for the child, which hoses financial aid. Have grandparents contribute to the account the parent has set up. OR, have grandparents wait to give a big sum during the senior year after the last year of financial aid has already been calculated.

I don’t understand this. Why would the entire disbursement count as income for the child if the grandparents set it up as opposed to the parents? Why does it matter who sets it up as long as the child is the beneficiary and not the owner?

We have two kids and four accounts - each parent has one for each kid. Max out. Which doesn’t actually equal that much when you look at expected college costs. We save aggressively in high interest rate CDs and Savin accounts and use 10k a year of 529 for private tuition.

We have 3 - prepaid and one 529 per parent to maximize the benefit.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:yes. possibly 4, to maximize state benefits.

in VA, it is 4,000 deduction per year per beneficiary (not per account).

It is per ACCOUNT HOLDER. So technically, each parent would have to open one for each kid and then you'd get 4.

No, it is per account. Each parent can open as many accounts as they want for each kid and get up to a $4,000 deduction for each account.

DH and I each have multiple accounts per child.

Doesn’t each account have to be a different type or something like that? Different investment focus or something?

Nope.

Yes something about the account has to be different - either the owner, the beneficiary or the investment allocation. So if one parent is opening multiple accounts for the same child in the Virginia plan each account has to have a different investment allocation in order to take multiple tax deductions.

Anonymous wrote:

Anonymous wrote:Ok but still, what if one child does not pursue any schooling beyond highschool, has a serious illness or adverse event? Do you not worry about being able to access that money for other needs if you had to? I feel like I'm playing an odds game which hopefully turns out fine, but want to be realistic about all possibilities.

You still get the money, they just recapture the tax benefit if it’s not used for qualified educational expenses. And maybe a small penalty? I’m not sure about that. But it’s not like the money is gone. Your concerns are a bit odd, op. Just put in the amount to get the tax benefit and no extra then.

I'm a nurse so I guess I think about all possible outcomes as I've seen some of the worst things that can happen to people.

Anonymous wrote:

Anonymous wrote:Ok but still, what if one child does not pursue any schooling beyond highschool, has a serious illness or adverse event? Do you not worry about being able to access that money for other needs if you had to? I feel like I'm playing an odds game which hopefully turns out fine, but want to be realistic about all possibilities.

You still get the money, they just recapture the tax benefit if it’s not used for qualified educational expenses. And maybe a small penalty? I’m not sure about that. But it’s not like the money is gone. Your concerns are a bit odd, op. Just put in the amount to get the tax benefit and no extra then.

The penalty is 10% plus paying taxes on the earnings

Anonymous wrote:

Anonymous wrote:Keep in mind that all accounts a parent has count against the financial aid for each child. For instance, we have two accounts - one for each kid - but the assets in both accounts counted against the oldest in his financial aid calculations. That's because the beneficiary can be easily changed. Because we don't have enough in oldest child's account to fund the entire four years, we are going to tap his brother's account so that is reduced and brother eventually qualifies for more aid.

Also, do NOT put the 529 in your child's name. It counts against them more in financial aid considerations than when it's in your name. Ideally, your child should have NO money in their name when they apply for aid.

By this you mean don't make them the owner of the account, but it's ok for them to be the beneficiary, right?

Yes, make them the beneficiary, but not the owner.

Also, if grandparents open a 529 account then disburses to that child, the entire amount counts as income for the child, which hoses financial aid. Have grandparents contribute to the account the parent has set up. OR, have grandparents wait to give a big sum during the senior year after the last year of financial aid has already been calculated.

MH and I each have an account for both kids that we both contribute to each month. I want them to have dedicated accounts and if they don't need them or get scholarships, we will transfer the money to siblings, save for grad school, or even save for their own kids.

Anonymous wrote:Keep in mind that all accounts a parent has count against the financial aid for each child. For instance, we have two accounts - one for each kid - but the assets in both accounts counted against the oldest in his financial aid calculations. That's because the beneficiary can be easily changed. Because we don't have enough in oldest child's account to fund the entire four years, we are going to tap his brother's account so that is reduced and brother eventually qualifies for more aid.

Also, do NOT put the 529 in your child's name. It counts against them more in financial aid considerations than when it's in your name. Ideally, your child should have NO money in their name when they apply for aid.

By this you mean don't make them the owner of the account, but it's ok for them to be the beneficiary, right?

Keep in mind that all accounts a parent has count against the financial aid for each child. For instance, we have two accounts - one for each kid - but the assets in both accounts counted against the oldest in his financial aid calculations. That's because the beneficiary can be easily changed. Because we don't have enough in oldest child's account to fund the entire four years, we are going to tap his brother's account so that is reduced and brother eventually qualifies for more aid.

Also, do NOT put the 529 in your child's name. It counts against them more in financial aid considerations than when it's in your name. Ideally, your child should have NO money in their name when they apply for aid.