Question about the maximal 529 contribution limit per year without using lifetime gift tax exemption

[stanleyli]

My wife and I have 2 kids. We are planning to contribute 50K into their 529 plan this year without using lifetime gift tax exemption. I know there is a 5 year lump sum option; but I want to first look for a way that we can contribute without using that 5-year lump sum option either.

Right now only my wife has a 529 account and listed one kid as the beneficiary. I am pretty sure we need to add the other kid as the beneficiary too since the gift tax is per donee.

Also we'd like to "split" the gift on Form 709. My questions are:

1. Is my assumption correct -- by doing this we can contribute maximal $17K * 4 to the 529 account in 2023?

2. Can we do it even if we file 1040 jointly?

3. Do we need separate 529 accounts (or, change that 529 account to a joint account) to "split" the gift, or we can simply use my wife's?

[Hal_Al · Accepted solution]

Q. Do we need to add the other kid as the beneficiary too since the gift tax is per donee.

A. Yes, but not exactly.  You don't add the 2nd kid to the existing account. You open a new account for the 2nd kid. Either parent can be the new account owner. But the the 2nd kid needs to the sole beneficiary of the new  account. A 529 account with more than one beneficiary is not allowed. 

Q. Is my assumption correct -- by doing this we can contribute maximal $17K * 4 to the 529 account in 2023?

A. Yes. But more accurately, $17K *2 to each account.

Q. Can we do it even if we file 1040 jointly?

A. Yes.

Q.  Do we need separate 529 accounts (or, change that 529 account to a joint account) to "split" the gift, or we can simply use my wife's?

A. Both parents do not need to be owners of different accounts. One parent can be the owner of both accounts.  What's important is that the money comes equally FROM both parents (using money from a joint bank account meets this requirement) and goes equally to each kid/donee.  That is, it doesn't matter who the owner of the 529 account is.  It matters who the beneficiary is. As stated earlier, the two beneficiaries need to be in separate accounts. 

[stanleyli]

Very clear. Thank you so much.

[NCperson]

@stanleyli you mentioned splitting the gift on Form 709, but I am not aware there is a reporting requirement since you each are giving no more than $17k to each child. 

@Hal_Al 

[Hal_Al]

I agree with @NCperson , you are not required to file form 709, if each parent gifts $17K or less to each child's 529 account (or together they gift $34K or less, to each kid) 

[stanleyli]

Thanks both of you for the further clarification!