Ask Terry Questions Grandparents opening 529 plans for grandchildren

Grandparents opening 529 plans for grandchildren

By Terry Savage on June 20, 2018 | College Savings / Student Loans

We have already deposited into 529 plans for each of our grandchildren ages 9-12. In a discussion on WGN Morning News you mentioned that these funds will adversely impact the financial status of our grandchildren when they begin using this money. Should we continue making deposits to these funds? What’s the best way for us to provide financial assistance to our grandchildren without affecting their ability to get financial assistance elsewhere?

Terry Says

There is a difference between the impact of money deposited in a 529 account with a parental custodian vs a grandparent as custodian. If the parent’s name is on the account, it is considered a family asset and impacts financial aid accordingly. (But money directly in a custodial account at a bank or a brokerage firm weights 5x more heavily against the family in the financial aid formula.) Money in a 529 account with a GRANDPARENT as a custodian is not counted at all — UNTIL money is withdrawn to pay for college. THEN, it is considered a “student” asset — and will heavily impact financial aid the FOLLOWING year! So my advice was to save this money to pay for the final year of college!! (There will be no aid need the next year!)
Or you could put some of the money in a 529 plan with the parents as custodians.

Recent College Savings / Student Loans Questions



a personal
finance question