529 Account
We are blessed with a 1 year old Granddaughter who lives in AZ. We live in Illinois and wish to either open a 529 account of $10,000 for her in IL, or I send the money to my son’s 529 account which is managed by his employer’s 529 account (Chase.) What do you feel is the best option?
Terry Says
Well, let’s start by saying that the granddaughter can use the money in a traditional 529 plan (not a prepaid tuition plan) in any state for any college. The advantage of using the Illinois Bright Start plan is you get a deduction for up to $10,000 of contributions on your state tax return. And Bright Start has recently got some top ratings from Morningstar.
Now here’s a question you didn’t ask: Should the plan be in YOUR (grandparents) name as custodians, or your son and daughter’s name for your grandchild? If they are saving in a different plan, I’d suggest making yourselves custodian of this plan. It won’t be counted as part of the family assets for financial aid — UNTIL the money is withdrawn for college. Then it will weigh very heavily against the family in the aid formula, as it will be considered a student asset. So tell them to use THEIR 529 plan first — and then take the money out of your plan to pay for the last year of college (when they won’t be asking for aid the following year!).