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We have 16 grandchildren below college age. Should we set up a separate 529 account for each of them, or can we combine the savings into just one account?

We generally recommend you establish a separate 529 account for each grandchild you wish to help. The reasons most people give for thinking about placing all the 529 savings into one account are to reduce effort and paperwork and to minimize annual account maintenance fees.

But setting up just one account to benefit multiple grandchildren only delays the effort and paperwork. A single 529 account can have only one individual named as beneficiary. To use the account later on for a grandchild who is not the current beneficiary, you would first have to establish a new account for that grandchild and transfer funds (tax-free) from the “master” 529 account to the new account.

And while it makes sense to minimize account maintenance fees, there may be ways to accomplish that objective other than consolidating the 529 funds into one account. Some 529 plans will waive their annual account maintenance fees (which can range anywhere from $5 to $30 per year) if you maintain a certain balance in your 529 accounts or if you sign up for the automatic contribution plan. Also note that most 529 plans impose no account maintenance fees at all.

Opening separate accounts for your grandchildren is a good idea for several reasons. One is that you can tailor the selection of 529 plan and investment option within that plan for each grandchild. For example, let’s assume your grandchildren are located in different states. It could make sense to use the 529 plan in the state where the grandchild lives if there are special state tax breaks for withdrawals from the in-state 529 plan, or if the state provides preferable treatment to residents in its own 529 plan when awarding state grants.

Another reason to maintain separate accounts is to keep your intentions clear. If something were to happen to you, and all the funds you set aside to help all your grandchildren are in the name of just one grandchild, your children could face a difficult time attempting to resolve the ultimate disposition of the 529 funds. With separate accounts, you can easily name the appropriate successor on each account and eliminate any confusion or discord in the event you die or become disabled.