There are benefits to having grandparents as the account holders, but a few rules as well.
Financial advisers typically advise parents to create a college savings account when a child is young — but it’s the grandparents who should set one up.
These tax-advantaged plans have become a popular avenue for college savings. More than $352 billion in assets were invested in 529 education-savings accounts in the middle of 2019, according to the College Savings Plans Network, up 7% from a year earlier. There were 14 million accounts in June, an increase from 13.8 million in 2018.Parents typically set up a plan for their children, though grandparents and other family members can as well.
If that were to happen, the money would remain in the 529 plan, but the dollar value of the gift would be included in the estate. For example, if a grandparent gave $75,000 for the five-year rule, but died in the third year, $30,000 would be included in the estate . Account holders can change the name of beneficiaries — it’s one reason why this type of account is beneficial for children without clear plans for college. If they end up choosing not to attend college, the account holder can name a new beneficiary, so long as it is a relative of the original beneficiary. “It’s very easy to do,” Curley said.If you want the money used a specific way, say so Once a new account holder is named, they can use the money however they see fit.
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