Who can Make a 529 Contribution?

A 529 contribution can be made by practically anyone. In the United States, these plans are an affordable and efficient way for parents to save for their children's college education. Contributors should understand, however, that there are federal and, sometimes, state laws that limit both the amount of the contributions and the manner in which they can be made.

There are rules that establish how contributions can be made to 529 plans. Under U.S. federal law, all 529 state programs must be set up so that contributors cannot give more to the fund than would actually be needed for a college education. Too much is defined as more than the amount it would cost to go to college for five years, including tuition, housing, books, and other possible fees. Some state plans have modified their 529 contribution rules to include savings for graduate school, with limits as high as $300,000 US Dollars or more.

This limit on how much can be contributed to a 529 plan is per beneficiary, and individuals can contribute more if the contributions are split between two or more beneficiaries. Contributions must be coordinated if plans have been set up in different states so that aggregate limits are not exceeded.

As for minimum 529 contribution rules, some states have these as well. No matter who is contributing to the college savings plan, some states require that there be a minimum amount of money contributed when the fund is established. Some states have rules that set minimum contribution limits for every contribution to the fund or for each year that the 529 plan is in existence. These requirements are waived by some states if contributors agree to use automatic deductions from their salaries or from their bank accounts to fund the 529.

For the various college savings plans across the United States, there are other 529 contribution rules to be aware of. One is that only cash contributions to these funds are accepted. In other words, investors cannot donate stocks, mutual funds, property, or other assets. Once cash is invested, some college savings plans do not allow the money to be funneled into specific investments. The programs often offer funds to put the money into, but investors have no control over what those funds invest in.