Who Can Open a 529 Plan?

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Kathryn Flynn

By Kathryn Flynn

March 13, 2024

Just about anyone, including some corporations, can open a 529 plan. College savings plans are popular because they’re easy to use, are tax-advantaged accounts, and sometimes qualify for state tax deductions. However, the type of benefits a 529 plan offers will vary depending on who owns the account.

Here are six examples of people who would benefit from opening a 529 plan to save for college and how:


529 plans can only have one owner, and that person is often the Mom or Dad of a future student. Parents can open a 529 plan when their child is very young or even before birth, giving their investment account plenty of time to grow. Investors who open a 529 plan account invest after-tax dollars that grow tax-free. Withdrawals are not taxed by the IRS as long as they spend the funds on qualified higher education expenses. You can open a 529 plan in any state, regardless of your location or the college the child wants to attend.

Parent-owned 529 plans also receive favorable treatment for financial aid eligibility. The Free Application for Federal Student Aid (FAFSA) reports only a maximum of 5.64% of the value of parental assets, while it reports 20% of the value of the student’s assets. If the student withdraws funds from the 529 plan to pay for college costs, they won’t have to report the amount as student income.


A student can open a 529 plan and name himself the beneficiary as long as he is at least 18 years old. Adults seeking a career change or graduate school probably wouldn’t have much time to build their education savings, but they may still be able to claim a state tax deduction for their 529 plan contributions, subject to any contribution limits.

34 states, including the District of Columbia, offer state income tax deductions or credits for contributions to a 529 plan. Most states only offer benefits for residents who use their in-state plan. If your home state is Arizona, Arkansas, Kansas, Maine, Minnesota, Missouri, Montana, Ohio, or Pennsylvania, you can claim a deduction for contributions to any state’s 529 plan.

In your 529 plan, you can usually claim a state tax benefit regardless of the time the money is held. So, instead of paying tuition straight from a bank account, students can funnel the money through a 529 plan to claim the tax deduction.

RELATED: How much is your state’s tax benefit really worth?


Today’s grandparents want to help pay for college. In fact, according to a 2014 survey by Fidelity Investments, 72% of grandparents believe it’s important to contribute to their grandchildren’s education.

With a 529 plan, grandparents can help fund a grandchild’s education and be sure that the money will be used for its intended purpose—college. Unlike UGMA/UTMA accounts, the owner of a 529 plan retains all legal rights to the funds throughout the account’s life, regardless of the beneficiary’s age.

Grandparents can use 529 plans as an estate-planning tool, as the plan removes the account’s value from their taxable estate. What’s more, in 2024, contributions up to $18,000 per individual ($36,000 if married and filing jointly) will qualify for the annual gift tax exclusion, or you can elect to treat the contribution as if it were made over a five-year period. That means you could make a $85,000 ($170,000 if married and filing jointly) contribution per grandchild in one year!

RELATED: Ways grandparents can help pay for college

Other friends and family members

Aunts, uncles, godparents, and just about anyone else can give the gift of education by opening a 529 plan for a child. As the account owner, you may qualify for state tax benefits as described above, and just like a grandparent, you can be sure that your gift will be used to pay for college.

In some cases, however, it may be easier to simply contribute to a 529 plan owned by the child or one of their parents. Many 529 plans offer online gifting, making contributing directly to the child’s 529 account easy.

U.S. savings bond or UGMA/UTMA owners

Before the popularity of 529 plans, many families saved for college with U.S. savings bonds or custodial accounts under UGMA/UTMA. Luckily, you can roll your funds into a 529 plan through both of these account types. This will enable you to benefit from tax-free growth and favorable financial aid treatment when you use the funds for college expenses.

If you’re 24 years or older and have bought Series EE and I bonds after 1989, you can redeem them tax-free by using the proceeds to pay for higher education, including contributions to a 529 plan.

Parents of UGMA/UTMA owners may also want to consider converting their child’s account into a 529 plan, especially if they apply for federal financial aid. The FAFSA counts assets held in UGMA/UTMA accounts as student assets. They are assessed at 20%, which can increase the Student Aid Index (SAI, formerly referred to as Expected Family Contribution or EFC).

529 plan assets are considered parental assets, which are assessed at a maximum of 5.64% of their value. That means a UGMA/UTMA account valued at $10,000 would increase a student’s SAI by $2,000, but $10,000 in a 529 account would only increase SAI by up to $564. And remember, higher SAI means less financial aid for the student.

501(c)(3) charitable organizations

A charitable organization wouldn’t use a 529 plan for tax savings since investment earnings are already exempt from income tax. Still, there are other reasons for a 501(c)(3) to consider a 529 plan, such as quality of investment options, low management fees, and due diligence provided by the sponsoring state. The charity can accumulate all funds into a single account since no named beneficiary exists. If charitable organizations use the 529 plan to fund scholarships, they will name the beneficiary when the recipient is chosen and then make distributions.

A good place to start:

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