Can I open a 529 account in anticipation of my future grandchild?
You can open an account before the birth of a child, though you have to go about it in a roundabout way.
First, you need to know the two key players involved in any 529 account. One is the account owner, who controls when the money is paid out and to whom. That may be you. (The account owner is usually the person who establishes the account and who puts money into the account.) The other key person is the designated beneficiary, who will use the money to pay for qualified education expenses. The account owner selects the designated beneficiary.
Since the person you want to name as the beneficiary is not yet born, you'll need to take two steps. First, you'll need to open an account and name a beneficiary who is a family member who will be related to your grandchild. Next, when your grandchild is born, you (the account owner) can change the beneficiary to your grandchild.
Check the details of each state's plan carefully, because some plans impose age restrictions on the beneficiaries (such as being under age 21). That may pose a problem if you plan to name your adult son or daughter as the initial beneficiary. Other plans may require that the funds be spent within a certain time period, such as within 10 years of when the original beneficiary would be expected to enter college.
Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before investing. More information about 529 plans is available in each issuer's official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits.