Ask Terry Questions 529 Brightstart for Grandson

529 Brightstart for Grandson

By Terry Savage on January 26, 2018 | College Savings / Student Loans

Dear Terry, First and foremost, THANK YOU for sharing your wisdom. I have been following your advice for many years now and it always leads me to a good place. I just read your column about 529s along with your opinions about BrightStart, the 529 College Savings Plan here in IL. I plan to open one for my Grandson,who is15, but I was told that since I can't use the State tax credit due to retirement income, I could gift the funds to my daughter so she and her husband could benefit from the credit which might be over $500. Here's the sticky part. There is nothing even remotely conservative about my son-in-law's money habits. I'm even debating whether or not to forgo the credit just to keep it simple. But that's my problem! I have yet to ask my daughter for her input because I have 2 questions for you. What consequences, legal or otherwise, would there be if my daughter opens the account in just her name with their son named as beneficiary. And can the same person be named beneficiary on more than one 529? Thank You, Grandma

Terry Says

Well, that's a real life problem, and you are wise to consider all the angles!  Many people might not know that income from retirement accounts is not (yet) taxed in Illinois.  So I can understand that the deduction for a contribution might not be useful.  By all means, gift the money to your daughter to use as custodian for and 529 Bright Start plan.  But here's how I would do it:  go to, and click on the button that says "Open an Account".  You can  download the application and fill it out.  The title should be your daughter as custodian for your grandson.   Then write out a check payable to Bright Start Savings and tell your daughter to send it in along with the forms.  She will be registered as the custodian, and eligible to take the tax deduction on her return, or their joint return. Now, one thing to think about after I've written all these instructions.  Your grandson will be needing the money in three years, and for the next four years after that.  That's not a lot of time to let the money grow.   So you certainly don't want to invest aggressively, given the huge rally we have already had in the stock market.   There is another alternative.  You can pay tuition directly to the college on his behalf when the time comes.   There will certainly be a gap and more funds needed, even after the family fills out the financial aid forms.   That might be more appreciated by your grandson than this gift now.  And the money won't be counted in the family's assets for financial aid, as the 529 will.    I'm a believer in 529 plans -- but the real benefit is long-term tax free growth.

Recent College Savings / Student Loans Questions



a personal
finance question