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529 plan for grandkids?
Old 03-12-2011, 03:32 PM   #1
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529 plan for grandkids?

I am planning to start setting aside a little money every year for my grandson's college fund. I expect to do the same for any future grandkids. I read some previous threads and see that 529s or US savings bonds can be decent vehicles for this. Is anyone else doing this? 529s a good route? Other ideas?
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Old 03-12-2011, 03:45 PM   #2
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I set up a 529 plan for each of my grand kids.

I like the fact that withdrawals will be tax free when the time comes. Also, my state provides a tax benefit for each year's contribution.
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Old 03-12-2011, 03:58 PM   #3
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I am in the process of working with my kids to set some up for GK's. I want them to set up in their states, though, so they can get the tax benefit. I will give money to them and they can fund. No I am not worried about the money not getting in.

I think it is a great gift to give, and the 529's are different all over the states.

this is from the SEC

An Introduction to 529 Plans


and this explains all the state plans

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Old 03-12-2011, 04:08 PM   #4
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Originally Posted by 52andout View Post
I am in the process of working with my kids to set some up for GK's. I want them to set up in their states, though, so they can get the tax benefit. I will give money to them and they can fund.
That is what I have done !
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Old 03-12-2011, 04:57 PM   #5
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We are doing Michigan 529s for our GK and do get a bit of a tax break. We were willing to do something else for the kids in California but they studied the issue and decided that the Michigan plan was one of the best. I haven't dug into it so I don't know if this is true or not. One note of caution: we started this when we had 4 GKs. Now we have 9. I don't think we had that in mind when we started.
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529 Plans
Old 03-12-2011, 05:22 PM   #6
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529 Plans

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Originally Posted by 52andout View Post
I am in the process of working with my kids to set some up for GK's. I want them to set up in their states, though, so they can get the tax benefit. I will give money to them and they can fund. No I am not worried about the money not getting in.

I think it is a great gift to give, and the 529's are different all over the states.

this is from the SEC

An Introduction to 529 Plans
You may want to consider leaving in your name and funding directly. If it's in the parent's name, this will count against any possible financial aid the kids may qualify for.
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Old 03-12-2011, 05:51 PM   #7
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Thanks for that info Boss2014. I'm in a similar situation to OP and with similar questions. Because my son has 3 kids fairly close in age and they will likely qualify for some level of financial aid due to multiple kids in school at the same time, I'm hoping that I can keep the help I'm going to provide out of sight so it doesn't interfere with financial aid. If I could have the 529b's in my name it seems like the best of both worlds....... tax free growth of investments but kids still look poor and deserving of financial aid.
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Old 03-12-2011, 06:03 PM   #8
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Thanks for that info Boss2014. I'm in a similar situation to OP and with similar questions. Because my son has 3 kids fairly close in age and they will likely qualify for some level of financial aid due to multiple kids in school at the same time, I'm hoping that I can keep the help I'm going to provide out of sight so it doesn't interfere with financial aid. If I could have the 529b's in my name it seems like the best of both worlds....... tax free growth of investments but kids still look poor and deserving of financial aid.
Sure, and not only tax free growth but if you stick with a plan in your state, you will get one of the largest state tax deductions available in the country !!
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Old 03-12-2011, 09:27 PM   #9
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I have 529's in VT for my 3 grandkids. I get a 10% state income tax credit (up to a limit which I do not hit.) The plan is with TIAA-CREF which is a reputable firm with low expenses. Before I moved to VT I lived in MD. The MD plan was with T. Rowe Price which is a good outfit but which has higher expenses than T-C, Vanguard or Fidelity. They also had an annoying annual maintenance fee there. I don't recall exactly what the tax benefit was, but it wasn't huge. So during those years I used the Iowa plan which was with Vanguard. No tax advantage since I wasn't an Iowa resident but that was OK since I like Vanguard. When I moved to VT I moved the money to our plan (over a period of several years) and got the VT tax credit for doing so.
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Old 03-12-2011, 09:42 PM   #10
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I had started a 529 plan in Maryland when we lived there. Now that we have our first grandchild and live in Virginia I transferred it to the VEST Program in Va. Not only does it use Vanguard funds, it gives a break on state taxes for contributions. I changed the beneficiary from our son to our granddaughter now that we have her social security number. Our intent is to contribute all of the RMD's from our IRA accounts to this 529 plan so that her college education will be fully funded. If and when the next grandkid comes along we will set up another 529 plan.
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Old 03-12-2011, 11:48 PM   #11
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I started 529 savings plan for my kids and think it's a good tool.

Depending on your location, you may also have pre-paid tuition plan option within your 529 plan. This could be a good option too, but not available in all states.
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Old 03-12-2011, 11:50 PM   #12
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Sure, and not only tax free growth but if you stick with a plan in your state, you will get one of the largest state tax deductions available in the country !!
Yep. But the fact that grand parent owned 529b's can exist for the benefit of a child but don't have to be revealed to the college financial aid folks seems almost too good to be true. I hope that's correct. Holding the 529b's in my (grandpa's) name = parents don't have to tell the financial aid office. Giving the money to DS to put in 529b's he owns = parents do have to tell the financial aid office. Is that it?

If contributing to 529b's also reduces my Illinois taxes (the rate just sky-rocketed 67%), that would be icing on the cake.

I expected the tax free investment growth.
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Old 03-13-2011, 08:23 AM   #13
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Thanks for the responses. It looks like a 529 is a good way to go. I used the links to compare the DC program and a few local states. I will likely go with DC for the state tax deduction but I am not happy with DC's investment options. They have a State Street S&P index with low expenses but all of the other options are managed mutual funds with 1%+ expenses. I downloaded the DC brochure and confirmed that current US Dept of Ed financial assistance guidelines do not count assets held in grandparents accounts. They do count assets in parents' accounts at 5.6% of the account total per academic year vs 20% for custodial accounts.
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Old 03-15-2011, 11:39 AM   #14
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You may want to consider leaving in your name and funding directly. If it's in the parent's name, this will count against any possible financial aid the kids may qualify for.
I had no idea, thanks for pointing this out, now I have to do more research
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