Grandparents: 529 College Accounts Great Way To Help Out

grandparents college 529Investment News reports that “66% of grandparents whose grandkids plan to attend college in the future are chipping in financially to support their education,” based on data in a March 2014 study by Legg Mason Inc.

About one-third of today’s grandparents said they feel that helping out with the grandchildren’s education is “extremely” or “very” important.

But it’s important to do that in a smart way. If you save using bank accounts, CDs, minor’s accounts, or life insurance, your funds may run out of steam before the end of freshman English! To get the tax-advantaged growth your grandchild needs, you’ll want to harness the power of the college 529 plan.

We have helped both parents and grandparents set up 529 college accounts for the kids. What appeals to all is that you can contribute as much, or as little, as your budget allows without commissions or complications.

529 college plans offer an unbeatable package of benefits. Here’s why:

  • These plans have amazing tax advantages. The growth within the plan is totally tax-free when funds are used for higher education. That means your funds can compound year-after-year without ever paying tax on earnings!
  • Parents and grandparents can contribute much more to a 529 college plan than to other accounts. At one top plan, you’re permitted to fund accounts until balances reach almost $400,000 in value.
  • The funds in the account are under the control of the account holder (which is often the grandparent). Worried about your hard-earned contributions being used to pay for tattoos, motorcycles or a trip to Borneo? That won’t happen with a 529, since you’re in control, even after you’ve contributed the gift.
  • You can give up to $14,000 per grandchild per year without reporting the gifts or paying any tax (and if you are feeling really generous, you can actually front-load your contribution with 5 years of gifts for a total of $70,000 per child).
  • Contrary to what many people believe, the college funds can be used in any state for virtually any school (including some schools overseas). Plus, you can chose to invest in any state’s plan.  (Over 70% of those polled by Legg Mason didn’t know that 529 accounts can be invested in plans outside of their home state.)
  • Funds may also be used for books, room and board, and can be transferred free-of-charge to other family members (including brothers, sisters and parents!) if the original recipient doesn’t use them.

There are many 529 plans out there, ranging from outstanding to dismal. We can help you pick out the right plan for your family, making sure you minimize costs and maximize benefits.

About Mari Adam

Mari Adam, Certified Financial Planner™ and President of Adam Financial Associates Inc, has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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