My first grandchild was born two days ago. I am thinking of setting up college fund for her. What’s your experience and what are the best options available?
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Congrats @seal16!
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I was advised just to add to the 529 the parents administer. We live in different states and I am single so if anything happens to me, it won’t get tied up in my estate administration. I contribute on Birthdays and Christmas directly to the 529.
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I also contribute directly to the 529 my D & SIL set up for GD. My reasoning is that D & SIL make too much money to receive need based financial aid. That’s unlikely to change. It will make it easier all around for there to be a single 529 when the time comes to use it. OTOH, if I wasn’t sure about their ability to receive need based financial aid, I would set up a grandparent 529. Beginning with the 2024-25 award year, distributions from a grandparent 529 will not be reported on the FAFSA (so won’t affect aid).
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Congratulations to you and your family @seal16 !
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Thank you all! We are thrilled! Right now it doesn’t look like they will qualify for financial aid but one never knows the future. What are disadvantages of grandparents set 529 vs parents?
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IMO, the only real disadvantage is coordination of use when the time comes. It’s not a big issue, though. If you’re not sure about future income, I think it’s best to do a grandparent 529.
In addition, it might be best to do a grandparent 529 if the grandparent would be able to benefit from state tax breaks for doing so. My state allows the tax deduction for anyone contributing to a 529, even if it’s the parent owned 529. Not all states allow that.
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Congratulations, @seal16! Enjoy every minute with your new bundle of love.
My mom had grandchildren in college from 1996 to 2014. She also had several grandchildren in private schools. Each year, she gave every family a generous check to be used for a child’s education. It was a life saver for some of us.
My D and SIL will also have full pay children and have contributed the max amount to their 529 each year. I believe their financial advisor had them open the accounts in another state for a tax benefit?
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This is what we plan to do, with a loose interpretation of educational needs. We’d like to make sure the grandchildren have the opportunity to go to Space Camp/Aviation Challenge and other such programs if they wish, as well as take any music, art, dance or swim lessons that interest them.
We’ve also set up investment accounts at Fidelity in our names that are TOD to each grandchild. I’m just hoping that H or I are around long enough that the little ones are old enough to have full control of their money.
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congrats!
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This is not intended to be professional advice, so please check. My understanding is that if you give your kids a cash gift, even for the benefit of your grandchildren, it’s a gift, with the tax implications of a gift. If you pay tuition or medical bills directly, it is NOT a gift.
I’m not talking about 529 accounts. Those are a different animal. I mean a parent giving kids a substantial sum, which is then used for tuition. That’s a gift. Pay the tuition and it isn’t.
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Tax gift $17,000 this year.
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We opened a 529 for each grandchild. My in-laws also opened one for each grandchild with their investment firm. We suggested they add to the one we had set up but FIL wanted to do it his way. One of the kids also has a 529 that his parents set up. We made a generous lump sum as did my FIL.
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But that only means that if your gift exceeds that amount, you, the giver, has to file a tax form. And each grandparent can give that amount so two grandparents means $34k/yr
It’s likely if you have that much money, your estate is going to be taxed anyway. It is possible that if you have $13M, and you have enough relatives and enough years you could do some great planning and not have the estate taxed at all by giving $17k per year now, but I think most people won’t have that problem.
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I certainly won’t have that problem, but…
I live in NYC and my adult married kid lives in another city. In both cities, it is not at all uncommon for grandparents to pay private school tuition. In both cities, the annual tuition for the most elite elementary schools exceeds $34,000–by a lot.
Many families have more than one child. My kid is good friends with a family for which one set of grandparents pays tuition for their kids. That’s roughly $150,000 a year. By paying tuition directly to the school they attend, they don’t use up any of their tax exemption. I doubt that the grandparents will live long enough to see all of the kids graduate from high school, let alone college, but they’ve already spent about $600-700,000 on tuition and none of the kids have finished elementary school.
Believe it or not, that scenario isn’t all that uncommon. The $34,000 number–which assumes both grandparents are living–isn’t enough to cover the annual tuition for one child.
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And that’s why, when our older son was 2 1/2, we moved out of Manhattan!
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Yikes!!!
My son who works in finance in NYC says people send their kids to private schools for connections as well as academics. Successful deals and investment tidbits between parents will more than pay for kids’ tuitions there. Yes, it is extremely common for grandparents to pay for summer camps, lessons and tuitions to reduce their estate. Some North Shore summer day camps are costing $332/day per child!! 
Is there anyone else who wants to toss those parenting apps the young folks use? DD and DSIL are using one to get advice for the 6month old that isn’t sleeping at night. We watch him 2-3d/week and have to write down everything he does and at what time. There are sleep windows where you have to put him down. SO many rules about how to put him down so he won’t associate whatever to sleep so when he wakes up in the night, he can get himself back to sleep. I can’t see that it’s working at all and they’re exhausted. We can’t watch him at our place because they’re constantly working on some new process they don’t want to disrupt. It’s not helping that they have friends who use these apps and their kids are sleeping 12 hours straight through. I’ve practically bitten off my tongue!
Routine is good. Obsessive routine? Not so much.
Have they ruled out GERD and reflux? My friend’s son was pretty big, ate well, was growing but didn’t sleep well at all and was pretty irritable. Turns out he had reflux and was just uncomfortable.
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