What Is a Dynasty 529 Plan and How Does It Work?

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Dynasty 529 plans allow families to fund multiple generations’ college costs from a single account. Regular 529 college savings plans offer unique benefits. These can be powerfully leveraged when wealthy families take a very long-term perspective. By naming young beneficiaries and changing them over time, the assets can grow tax-free for decades. However, dynasty 529 plans have limitations like gift taxes on large contributions and successors possibly withdrawing the funds.

A 529 plan is a tax-advantaged account designed to encourage saving for education costs. Contributions grow tax-deferred and withdrawals are tax-free when used for qualified expenses like college tuition.

Regular 529 plans allow parents, grandparents and others to invest today to pay for a specific child’s future college costs. Dynasty 529 plans take the concept further by taking advantage of two key features:

  • Beneficiaries can be changed at any time.
  • There are no required minimum distributions, so funds can remain invested indefinitely.

By naming a young beneficiary, like a newborn grandchild, and periodically changing the beneficiary to younger generations as each enters college, a dynasty 529 allows assets to grow tax-free for decades. Each time one beneficiary finishes college, the account owner simply names a new beneficiary from the next generation.

This creates a perpetual education funding vehicle. A dynasty 529 could theoretically provide tax-free growth for 100 years or more, funding tuition for generations of beneficiaries from a single account.