The best way for grandparents to help pay for college. 529 plans offer unique benefits for grandparents, including reducing estate tax exposure, being able to retain control of the assets throughout the life of the account, ease of management and flexibility.
Can you open a 529 savings plan with Charles Schwab?
Start an education fund for your children or a family member with a Schwab 529 Savings Plan. You can open and contribute to almost any 529 plan, no matter what state you live in and regardless of your age or income.
Is there a 5 year gift tax on 529 plans?
Tax law allows 5-year gift tax averaging only for gifting that involves 529 plans (and in rare situations, Coverdell education savings accounts). Here are a few rules and tips to keep in mind when considering superfunding a 529 plan.
What are the rules for contributions to a 529 plan?
For example, if a taxpayer uses 5-year gift tax averaging on $50,000 of contributions made this year, the gift will be counted as $10,000 this year and $10,000 for each of the next 4 years. Next year, the same taxpayer contributes $25,000 and makes the 5-year election again.
Grandparents sometimes set up their own 529 plans for their grandchildren, not realizing that they don’t need to be the account owner to contribute to a 529 plan. Or they may want to qualify for a state tax benefit.
How to change the owner of a 529 plan?
1 Change account owner. The grandparent can change the account owner to the parent, if permitted by the 529 plan. 2 Rollover 529 plan funds. The grandparent can roll over a year’s worth of funds to a parent-owned 529 plan. 3 Take a distribution later. 4 Wait until after graduation. …
Can a gift be made to a 529 plan?
Almost all 529 plans accept gift contributions by check, and some 529 plans offer gifting platforms that allow friends and family to make secure electronic deposits. 529 plan contributions can also be made with Gift of College gift cards, which are available to purchase online or at over 3,000 retailers.
Can a 529 account be reported as a parent asset?
Instead, the account will be reported as a parent asset on future FAFSAs, reducing aid eligibility by as much as 5.6% of the account’s value. However, not all 529 plans let you switch account owners.
