529 Investment for Grandchild?

[elkantlers]

I'm looking at starting a 529 investment account for my 1 YO grandson. Is this the best option for my money or is there better options? This is primarily for his education down the road.

Thanks.

 

[Jofes]

If he decides to be a degenerate, can you roll those funds over to a dall hunt for his 18th birthday without incurring any tax liability?

 

[BuzzH]

I set up a 529 account for both of my nephews, didn't do a whole ton of research, but seemed as good as anything I could come up with and very easy to do.

 

[Pucky Freak]

When compared head to head with Coverdell, Coverdell was a better deal for my family on several fronts than the 529, so that is what I have for my 3 kids. It’s worth looking into. Some families will be better off with the 529 - depends on circumstances.

 

[Benjamins]

I started one for each of my daughters. Through the bank of ND they match up to $300 in initial deposits and an additional $200 if you fund the account before their 1st bday. Not sure what other states do but depositing $500 and getting $500 free seemed like a no brainer. Also, I cannot effin stand a million toys around the house so I ask people donate to that vs buy toys for bdays and Christmas and such.

 

[elkantlers]

Looks like I still have some research to do. I've never heard of a Coverdell and I didn't know each state had different plans.

 

[wolfpup]

Depends on the state. Some states have a state tax deduction associated with it, but you MUST use the state approved program. You will be the owner of the account so you can decide who the beneficiary can be. If the money doesn't get spent on higher education you can use the money and just pay tax on the earnings. I have one for each of my kids, but I am hoping for scholarships... I call it my "new boat fund". The money can be spent on room and board as well during their college years.

 

[HSi-ESi]

Other folks can contribute to a 529 as well. We set them up for our kids and add some money in every year. But we also gave the info to grandparents, aunts / uncles - so they could contribute in lieu of gifts if they want to.

 

[JLDemo]

We've got 529 set up for each child, did so at birth and contribute to it monthly. All of the accounts are healthy and really can't ask for much more. They'll be good to go. It's a great option if you're like us and don't day trade, have the funds to play the big boy games in stocks and just want to contribute what we can and forget about it for the sake of the kids and us not worrying about scholarships and tuition. Hell it'll even cover their rent through college. To my understanding, if one goes to trade school, it'll still cover expenses if it's an approved program. Others can make contributions as well for bday gifts or whatnot.

 

[Bob-WY]

We have one for our grandson. He will never know it exists. Should he not deserve it for some reason I keep it

 

[belshawelk]

Great option. I was able to claim $8000 per year of deposits ax deductions. I stated small and ended up paying all of my oldest daughters college. Drew average rates but it makes it a great way to save if you add the tax advantage.

 

[fishing4sanity]

I don't know if there are better options, but as a grandparent I think the 529 is a good option. A good place to help with education expenses, especially if you prefer to contribute and forget it (not actively manage where the money is invested). Also, I think a 529 owned by a grandparent doesn't affect the child's FAFSA/financial aid (however, if I'm wrong - it won't be the first or last time). We've started a 529 for each grandchild and contribute something annually.

 

[Addicting]

Looks like I still have some research to do. I've never heard of a Coverdell and I didn't know each state had different plans.

I did one for my Son and did a different plan thru my credit union for my daughter.

So far they are both doing well but my daughter has pulled away from my son with on average 2-3% better returns. There are some tax benefits to the gains in a 529 that may off set that difference. But there are also a lot of rules on it where my daughters can be used for anything.

If I had it to do over again I would do both thru the credit union plan. Having it available for a first vehicle, wedding, house, etc ect is a great option if they choose not to go to college.

 

[wolfpup]

I did one for my Son and did a different plan thru my credit union for my daughter.

So far they are both doing well but my daughter has pulled away from my son with on average 2-3% better returns. There are some tax benefits to the gains in a 529 that may off set that difference. But there are also a lot of rules on it where my daughters can be used for anything.

If I had it to do over again I would do both thru the credit union plan. Having it available for a first vehicle, wedding, house, etc ect is a great option if they choose not to go to college.

That's a great point. I will offer a counterpoint. The credit union's annual earnings will be taxed each year to the account owner. Not typically an issue if it is in the kids SSN but will be during their earnings years. A 529 plan offers tax deferred earnings much like an IRA. You can also use it for whatever you want, but you will be required to pay the tax on the earnings when you eventually withdraw the funds, or you can pass them down to another generation which is why they are often referred to as "grandparents plans".

 

[wolfpup]

I don't know if there are better options, but as a grandparent I think the 529 is a good option. A good place to help with education expenses, especially if you prefer to contribute and forget it (not actively manage where the money is invested). Also, I think a 529 owned by a grandparent doesn't affect the child's FAFSA/financial aid (however, if I'm wrong - it won't be the first or last time). We've started a 529 for each grandchild and contribute something annually.

You are correct. If the grandparent is the account holder, it does not affect the FAFSA. If the parent owns the plan, the first $10,000 is safe, but above that it is considered parental assets for FAFSA.