Thought I’d make an offshoot of the grandparents thread
Several posters have mentioned contributing to a 529 plan for their grandchildren. I admit I don’t know anything about them. How do they work and how do you set one up?
Experiences of those who have done so would be appreciated.
Thanks
It’s no different than setting up for your own kid. You go through your state plan…or any state. I live in TN but my plans are NH (Fidelity) and Nevada (Vanguard). I got Fidelity because I got their credit card and got a 2% rebate which went directly into the 529. I got Nevada for my other child because I just liked the Vanguard plan (low expenses).
In my case I saved too much…so short of grad school, I’ll be changing a beneficiary to a future grandchild. You can always change the beneficiary.
So find the program you like and go for it.
Some states allow a state income tax break so that may help you…on money you contribute.
Hope that helps.
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And, IIRC, grandparent owned 529 accounts aren’t reported on FAFSA.
You can contribute up to $4k per grandchild, per year. If that grandchild doesn’t go to college, a sibling can use the money towards their education. You set them up through your state.
Actually my CFP told me I can “pre-contribute” up to 5 years worth of gift transfers ( $15K/year x 5 years = $75K) to each grandparent-owned 529 account without having to report it to the IRS. (But then you can’t gift the child any additional monies for the next 5 years.)
And starting 2022 distributions from grandparent-owned 529 account are not reported as unearned income on the student’s tax return.
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It’s really easy to set up a 529 in my state. It’s done online via a link on the state website. We get a state income tax break for the money we put in the account each year.
So, if it’s not too personal, how much are you putting into the 529? I’m putting in $500 at Christmas and $500 on their birthday. That won’t fund an entire college education, but I don’t plan to be entirely responsible for it anyway.
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I put in $1000 into each 529 account when I opened them. Twin grandbabies so two accounts.
I also opened the accounts online and bought the state’s plan since it’s well rated.
To start a 529 account, you need to have some basic information about your grand child: full legal name, social security number, date of birth, and you need to make a minimum deposit to fund the account. That amount varies by state, but it’s usually around $50.
I’m a parent, but I would be very grateful for those amounts!
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Does it also work for great-grandparents?
Does it also work for great-grandparents?
Yes. Anyone can open a 529 account for a minor. You don’t even need to be a relative.
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Is there a cap on how much can be contributed total to a minor/year? (Just in case there are many doting loved ones and the sum adds up.). We just did coverdell accounts for our kids so never did 529s.
There is no cap on the amount that can be contributed a 529 account.
That might be limited to a specific State’s plan. Per example, for NJ (NJBEST) the statutory limit is $305,000 per beneficiary.
That seems like a lot now, but in my case, I had started at age 0.1, made fortunate investment choices, and with that the balance eventually grew to whatever limit at THAT time, at some point preventing me from contributing further.
We only had a Coverdell acct for each child and rolled it over so D got all of it so it could grow and recover before D n ended to use it all in 2nd to last year in college. It was a very modest amount but we were glad to have it. I’m not familiar with 529s.
I had 529s for each child, enough to cover the balance after their merit scholarships plus some toward a year of grad school. I invested early on in our state’s plan. States vary by the maximum in each beneficiary’s account. Michigan, my state, is $500K. D2’s made a lot of money because I rode it out aggressively longer than her siblings. I transferred some of it to D1 to pay toward dental school. I’ll use up D2’s in January to pay toward her 2nd semester of grad school.
The earnings on the account are not taxable if the money is used for qualified educational expenses.
I’ve started accounts in our state plan for both granddaughters and contribute every year.
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you can contribute $15k per beneficiary per year - without gift tax. $30k if married (each spouse contributes $15k)
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For 2022, the maximum amount per beneficiary goes up from $15k to $16k.
@mom60 thank you for starting this thread.
I opened and have been contributing to a 529 for each of my grandchildren. DD has opened separate 529s for her children. DS has not done so yet. DS asked whether it made more sense for him to contribute to the 529 that I have set up for his children.
My state’s 529 is one of the top-rated ones. DS’s state’s 529 is not, and of course, he would forgo the state tax deduction if he contributed the ones that I opened.
I am aware of the recent changes to grandparent 529s. So, when it comes to financial aid, does it matter if it is a parent or grandparent 529? Anything else to be aware of with parent vs. grandparent ownership?
I know nothing about 529 so I’ve got lots to learn. We never heard of them for our own kids. We live in Ca and our grandchild is also likely to live in Ca. I’m confused if we need to do the state plan or if we have other options. Can the parents contribute to what we set up or can we contribute to one my daughter sets up?