Background (this info is not strictly necessary-to-know in order to answer my question below, but it may be of interest to others in the same boat):I have accumulated a substantial amount of Visa gift cards through my travel hacking and manufactured spending activity. One of the methods I use for cashing out these gift cards is using a service called Evolve Money to pay certain bills that could not otherwise be paid via credit card, including contributions to the two 529 accounts I set up for my two kids.
Because Evolve Money only allows you to make one payment per account per month, the maximum number of gift cards that I have been able to cash out into my 529 plan is two (one for each kid's account).
Evolve Money announced yesterday that they will start charging fees to use their service to cash out gift cards in this manner, starting next week. So, starting next week, this will no longer be an attractive option to cash out gift cards.
My proposed potential solution to cash out as many gift cards into my 529 plan as possible is to open additional 529 accounts naming every available "member of the family" (as defined in the relevant IRS rules -- see
IRS Publication 970, page 61) of my kids (including myself, my wife, our respective parents, etc.). I can then fund each of these accounts with a separate gift card this week using Evolve Money, and as soon as possible thereafter I will transfer the funds from all of those accounts into my kids' accounts.
Question:Are there any negative consequences or reasons why it would not be a good idea to establish multiple separate 529 accounts for the sole purpose of funding each of them with the intention of transferring the funds to the existing accounts of the true intended beneficiaries (i.e., my two kids)?
My understanding is that as long as the beneficiaries of all of the accounts are "members of the family," there would be no tax consequences to moving funds around among them.
The fact that I would be frontloading all of the funds (possibly at the time of a market peak) does not bother me -- that's what I would have done anyway at the beginning of the year if it were not for the fact that I am using gift cards and Evolve Money to fund my contributions.
Thanks in advance for any insights.