Dear Dr. Don,

Is a child allowed to have more than one 529 plan? I am divorced, and my ex-husband has a 529 for my son. I want to know if I can open my own 529 for him, or do I need to contribute to the existing account my ex-husband opened? I appreciate the advice.

-Anne Accumulates

Dear Anne,

Your child can have more than one qualified tuition program, or QTP, or 529 plan, so feel free to open one up for him. There are contribution limits for these plans and gift tax implications for large gifts. That's because a beneficiary is considered to be the recipient of a gift of the contribution to the plan. The typical parent isn't going to contribute more than the $13,000 annual exclusion limit for gift taxes ($26,000 for married couples who use gift splitting), so contribution limits aren't an issue. There's no gift tax on annual gifts up to the annual exclusion.

States may have limitations on contributions when it comes to the tax deductibility of those contributions. More on that below. The federal limitations are based on the expected amounts needed to cover the qualified education expenses of the beneficiary. That's not much of a limitation.

In deciding which plan to go with, it's always best to start by looking at your state's 529 plan. You'll want to see if there is any tax benefit associated with contributing to your state's plan. If your state doesn't offer a tax benefit for contributions, there's no reason to stay with the home team, and you can shop other state 529 college savings plans looking for a low-cost provider with investment options that match your goals for the plan.

While parents are familiar with the tax benefits on the distributions, you are looking for tax benefits on the contributions as well. Some states will give you a tax deduction regardless of whether you use their plans or another state's 529 plan. Other states will only give you the tax deduction if you use their plan. Not all states offer a tax deduction for contributions, but a majority of states do offer this benefit. For you to benefit, your state has to offer the tax deduction.

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