529 for grandkids

Terry,
In your 12-20 Chicago tribune column, you said “don’t start withdrawing until the junior year of college..”. Why? I can see why it wouldn’t effect their junior year Fafsa but what about their senior year Fafsa
Also, are contributions in to the 529 subject to gift tax if they exceed the annual exclusion?
Thanks for your help!

Terry Says:  Well, the point is that you MUST withdraw the FAFSA to pay for the last year of college — because the money can’t be used to repay student loans. And under the new rules, starting in 2017 the parental income from the year prior to the current year will be used to determine aid eligibility (that is one year earlier than currently).  So you could start withdrawing in the junior year.

Re the question about the gift tax, the unique thing about a 529 plan is that each grandparent can gift up to 5 years of the allowable annual gift tax exclusion (currently $14,000 per year) at ONE TIME to jumpstart a 529 plan, and to get the money out of their estate.  Each 529 plan has a limit on maximum contributions to the plan, though.