Seventy two percent of grandparents polled in a 2014 Fidelity survey felt it was important to help pay for grandchildren’s’ educations. Wow! That is a very large number. For those who are in a position to chip in a little (or a lot) for college for their grandchildren, here are a couple of ideas.
Open a 529 in your home state.
- This option allows you to take a state income tax deduction (where offered) on 529 college savings deposits.
- You can open an account with yourself as the owner and a grandchild as the beneficiary. This works very well if you are worried about the spending habits of your children and want to protect the money for its intended use.
- 529 plans have easy, target date investment options so you don’t have to stress about choosing a mix of mutual funds.
- You can change the beneficiary to any relation out to first cousin. This is nice if Grandchild #1 is more interested in body piercings than Bachelors of Arts. The money can be used by your other grandchildren.
Open a Uniform Transfer to Minor Account (a.k.a. UTMA or Custodial Account).
- For those of you who have appreciated securities you would like to gift to grandchildren or just like more investment flexibility, this may be a more interesting option for you.
- Money put into these accounts is an irrevocable gift to that child, so there is no changing your mind as in a 529 account.
- UTMA accounts can be used for any benefit of the child, including private high school, summer camp, car purchase, wedding, or help buying a new home. This is more flexible than the college-only 529 account.
There is no right or wrong account to use. Each has its benefits and restrictions. Many people use a combination of both. For a nice table view of the differences, check out this page on Fidelity’s website:
If these topics sound like they would be of interest to you, your employees, sales conference, or professional organization, contact me at 303-324-0014 or kristi@