529 Plans for Your Grandchildren: Everything You Need to Know
If you're looking for a meaningful, lasting way to support your grandchild’s future, helping with their education is one of the greatest gifts you can give.
A 529 plan is a powerful, flexible tool to do just that — and it’s easier to set up than you might think. KK Financial Solutions can help you open and manage a 529 plan tailored to your goals.
Here’s a full breakdown of what a 529 is, how it works, and how you can make the most of it — especially as a grandparent.
What Is a 529 Plan?
A 529 plan is a tax-advantaged savings account designed specifically to pay for education expenses — not just for college, but also for K–12 tuition, graduate school, trade schools, and even apprenticeships.
Here’s why they’re popular:
- Tax-deferred growth: Your investment grows without being taxed every year.
- Tax-free withdrawals: When the money is used for qualified education expenses, you pay no federal income tax on it.
- State tax perks: Many states offer deductions or credits for 529 contributions — sometimes even if you invest in another state's plan.
Qualified Expenses Include:
- Tuition and fees
- Room and board (for students enrolled at least half-time)
- Books and supplies
- Computers and internet access
- Apprenticeship program costs
- Student loan repayments (up to $10,000 lifetime)
Important: For K–12 education, 529s can be used for private school tuition — but there’s a limit of $10,000 per year.
Can Grandparents Open 529s?
Yes! As a grandparent, you can open and own a 529 account for your grandchild.
- You control the account — including how the funds are invested and when they are distributed.
- Starting with the 2024–2025 FAFSA, grandparent-owned 529s will no longer affect your grandchild’s financial aid eligibility.
- (But if the school uses the CSS Profile — mostly private colleges — they may still ask about outside 529s.)
Key Benefits for Grandparents
1. Estate Planning Advantages
529 plans are considered completed gifts for tax purposes, meaning:
- They reduce the size of your taxable estate.
- But you still maintain control over the account.
You can gift up to $18,000 per year ($36,000 for married couples) per beneficiary without filing a gift tax return in 2024. In 2025, these limits rise to $19,000 and $38,000 respectively.
Want to give more? You can "superfund" a 529 by front-loading five years' worth of gifts all at once — up to $90,000 ($180,000 if married) in 2024.
2. Roth IRA Rollover Option
Starting in 2024, unused 529 funds (up to $35,000) can be rolled into a Roth IRA for the beneficiary — tax- and penalty-free — if:
- The 529 has been open for at least 15 years
- Contributions and earnings rolled over have been in the account at least five years
This gives extra flexibility if your grandchild doesn’t use all the 529 funds for education.
3. State Tax Deductions
Depending on where you live, you might qualify for a state income tax deduction or credit for your contributions — even if you invest in an out-of-state plan. (Use KK Financial Solutions to check your specific state's rules and find the best tax-advantaged option.)
Can You Change the Beneficiary?
Yes. If one grandchild gets a scholarship or doesn't need the full amount, you can change the beneficiary to:
- A sibling
- A cousin
- Even yourself (if you want to go back to school)
There are no penalties when you transfer between eligible family members.
Where Can You Open a 529 Plan?
You can open a 529 plan directly through a state’s 529 program or through many financial institutions, like:
- Vanguard
- Fidelity
- Charles Schwab
- T. Rowe Price
- American Funds
- Merrill Lynch (Bank of America)
- Franklin Templeton
Every state (plus Washington, D.C.) offers at least one 529 plan, and you are not required to use your home state’s plan.
Contact KK Financial Solutions to help compare options and open a plan that fits your goals.
Tip: Even if you live in State A, you can open a 529 from State B if you like their plan better — but always double-check if your home state offers a tax break only for using their own plan.
Top 529 Plans for Grandparents to Consider
Not all 529 plans are created equal — some stand out for their low fees, strong investment options, and ease of use. Here are a few 529 plans that are frequently rated among the best:
1. My529 Plan (Utah)
- Extremely low fees
- Highly customizable investment options
- No state residency requirement
- Widely considered one of the best plans in the country
2. New York’s 529 College Savings Program (Direct Plan)
- Very low fees
- Managed by Vanguard
- New York residents get a state income tax deduction
- Simple, easy-to-use investment menus
3. Vanguard 529 College Savings Plan (Nevada)
- Access to Vanguard’s low-cost index funds
- Easy online account management
- No residency requirement
- Great for hands-off, long-term investing
4. Fidelity-managed 529 Plans (in states like New Hampshire, Massachusetts)
- Solid investment choices
- Great online tools and customer service
- Trusted name in investing
5. California’s ScholarShare 529
- Strong investment lineup
- Low costs
- No residency requirement
- Good range of portfolios for all risk levels
Quick Tip
Choosing the right 529 plan isn’t always straightforward — especially when it comes to maximizing tax advantages, navigating state-specific rules, or coordinating with family.
That’s where KK Financial Solutions can help.
✅ We’ll walk you through your best plan options
✅ Help you understand the tax benefits and estate planning angles
✅ Set everything up for you or with your family
What Happens If You Don’t Want to Open Your Own 529?
If you prefer not to manage your own 529 account, you can still contribute to a parent-owned 529 account. Programs like Ugift® make it easy — you simply send a gift directly into the existing 529 account. This is a great option if you want to contribute without taking on the paperwork yourself.
Potential Drawbacks to Keep in Mind
- Non-qualified withdrawals incur taxes and a 10% penalty on earnings.
- Investment risk: Like any market-based investment, the balance could go up or down.
- CSS Profile schools: Some private colleges still count outside 529s for financial aid calculations, even under the new FAFSA rules.
Final Thoughts
A 529 plan offers a smart, flexible, and generous way to help your grandchild succeed — whether they dream of college, graduate school, or a skilled trade. Thanks to new rules, it’s easier than ever to support their education without hurting their financial aid prospects.
Whether you open your own 529, contribute to an existing one, or plan it as part of your estate strategy, KK Financial Solutions is here to guide you through every step. You’ll be giving a gift that truly lasts a lifetime.
Quick Checklist for Grandparents:
- Decide if you want to open your own 529 or contribute to a parent’s.
- Check if your state offers tax perks for 529 contributions.
- Consider “superfunding” if you want to maximize your gift.
- Track how funds are used to ensure they meet "qualified expense" rules.
- Remember the Roth IRA rollover option if plans change.
- Reach out to KK Financial Solutions for help comparing and opening a plan that fits your legacy goals.
