The theme this week on the One Minute Retirement Tip podcast is: grandparent-owned 529 college savings plans. 

Today, I’m talking about grandparent-owned vs. parent-owned 529 plans. A good place to start with explaining the important differences between the 2 is to look at how these accounts are set up. When you set up a 529 college savings plan, there is an account owner and a beneficiary. The 529 plans that I have for my kids are titled with my name, then for the benefit of...my child. I have one set up for each of my children. 

The 529 plans for my kids are set up as parent-owned 529 plans. Most of the 529 plans that I see are parent-owned, but I think grandparents miss an important opportunity to help support their grandchildren pay for college if they don’t establish a grandparent-owned 529 plan for their grandchildren. 

Tomorrow, I am going to dive into 6 big benefits of the grandparent owned 529 plan, but for today, I just want to explain the primary difference between the 2 accounts. There used to be more differences in how parent vs. grandparent owned 529 plans were used for determining financial aid eligibility, but some recent law changes leveled the playing field making 529 plans more attractive for grandparents to own. 

A blog post by Wayne Johnson summarizes this best: “as account owner, a grandparent can retain some measure of control over his or her contributions by changing investment selections, authorizing account withdrawals for both education and non-education purposes, or even closing the account. A grandparent will have this control over these contributions even though they generally aren’t considered part of his or her estate for tax purposes — a rare advantage in the estate planning world.” 

That’s a pretty compelling reason to consider opening a grandparent-owned 529 plan. But just remember, the only difference is the account owner, which trickles down to control over investments, withdrawals, & changing beneficiaries. 

That’s it for today! Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance