Is it better for us, the grandparents, to maintain 529s in ours and the grandkids’ names OR give the money intended for our investment to the grandkids parents to invest in the 529s they have for their children? (The parents are honest and will invest the money according to our wishes.) Thanks for being willing to answer our question. John
Terry Says: There are plusses and minuses to each approach. If the grandparent is the custodian of the 529 it does not have to be disclosed as a parental asset on the FAFSA form, thus possibly qualifying the family for more financial aid. BUT, when the money from the grandparent-custodian 529 plan is distributed, it is counted as a student asset — and thus weighs much more heavily against the family in the aid process! The obvious answer is not to distribute the 529 money until the last year when the family won’t be applying again for aid — unless the student goes on to graduate school! One thing you cannot do with 529 money is pay down student loans.
And there are other considerations, about grandparents being custodians of the 529 that you should consider. Here is a link to a complete article from Savingforcollege.com on that topic.