If your adult children have established 529 plans in another state, can Illinois grandparents contribute to those plans? It is understood that no Illinois tax break would occur. How can we locate the best states to make such investments for our six grandchildren?
Yes, you CAN and SHOULD contribute to the 529 plans set up for your grandchildren! Did you know that you can contribute 5 times the allowable one-year gift tax exclusion (currently $14,000) to each grandchild — from each of you! (Just in case you’re trying to get a lot of money out of your taxable estate!) But even a small gift can grow over the years. And of course, the accounts can be used by any of the grandchildren, in case one gets a scholarship. And you can contribute to any state’s plan — and they can use the money for college in any state. But, correct, you won’t get the deduction on your state income taxes unless you contribute to the Illinois plan.
The site to explain all of this is www.SavingforCollege.com, and they have just released their latest performance survey over 3, 5, and 10 years. The link will take you directly to that page on their site. It’s worth it to use a plan with low costs and higher performance ratings.