Can someone start a 529 plan for themself?

Question

My son was gifted a sizable amount of money from his grandfather. Can he put this money into a 529 plan for himself or are 529 plans really something you create for others with your own money? I am having a difficult time understanding the mechanics of College 529 plans.

Answer 1

529 Plan in a search engine gets links like the good one below. The 529 Plan is a state plan under IRS rules, so it varies from state to state. Either it guarantees tuition or defers taxes on interest. Normally, parents (or grandparents) are putting in money to cover the future expenses but there appears to be nothing to prevent a student putting money in, but from my view it depends on the plans available. If the kid is young, then any interest earned in other ways probably gets taxed at your rate or higher. So putting money in an investment 529 where taxes are deferred helps, especially if you can set up things so he is paying his own taxes at lower rate. But you are gambling that you can invest money at a good enough rate to beat any increase in tuition after paying the taxes. I think the plans, for the states which have them, where you pay into a fund that guarantees todays tuition (at state run or participating colleges), in the future, providing, of course that you want to go to one of the colleges on the list. In either case, the younger the kid is, the better the plan is because of the longer time to earn interest or the greater tuition increases are likely.
I will mention that Texas has just reported that its 529 Guaranteed Tuition plan is underfunded by something over a billion dollars. Political pressure will probably fund it, but this is the state that stands at 45th, 46th, or 47th in funding things like child health insurance and other "liberal" measures of reasonable government.