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Message
529 for grandparents questions
Posted on 5/16/25 at 10:37 pm
Posted on 5/16/25 at 10:37 pm
So my parents want to contribute to my kids college tuition. They’re both on state pensions and have amassed a substantial amount of money. I’m an only child and feel blessed that we don’t have to worry about money for them (for the time being).
They’re in GA but our kids 529 is NV. However, it looks like contributions in the GA 529 provide for a state income tax deduction. Also, it seems kids can have multiple 529 accounts.
So, my thinking is they start a GA 529 with the boys as beneficiaries and use it as a pass through for whatever they want to provide so they get the tax deduction. We use the NV 529 to fill in the gaps. Plus we have two kids so I have no fear of money getting stranded there….we’ll have plenty of use for it getting these kids through.
Good idea? Am I missing something? TIA.
They’re in GA but our kids 529 is NV. However, it looks like contributions in the GA 529 provide for a state income tax deduction. Also, it seems kids can have multiple 529 accounts.
So, my thinking is they start a GA 529 with the boys as beneficiaries and use it as a pass through for whatever they want to provide so they get the tax deduction. We use the NV 529 to fill in the gaps. Plus we have two kids so I have no fear of money getting stranded there….we’ll have plenty of use for it getting these kids through.
Good idea? Am I missing something? TIA.
This post was edited on 5/16/25 at 10:39 pm
6
Posted on 5/17/25 at 12:00 am to SquatchDawg
piggy backing... I read you can convert $50k of a 529 to a roth for the kid... if so, wouldn't it make more sense to spend after tax money on college and save the $50k for kiddo's retirement ?
Posted on 5/17/25 at 6:22 am to SquatchDawg
We have LA 529s for the grandkids for the tax deduction and their mom has 529s for them in their home state.
Posted on 5/17/25 at 7:25 am to SquatchDawg
Grandparent owned 529 is advantageous. First, they live in GA so get a state tax deduction. Plus, "Starting in the 2024–2025 academic year, the simplified FAFSA no longer requires cash support or distributions from a grandparent-owned 529 to be reported. " Thus, it doesn't hurt your kids for financial aid like your 529s. Vanguard Understanding 529 Grandparent Loophole
Posted on 5/17/25 at 7:32 am to Zilla
529 to Roth rollover is capped at $35k lifetime (not $50k as posted above) and counts towards annual Roth contribution limit. Also there are other rules.including 529 account must be 15 yrs old and funds converted must have been in 529 at least 5 yrs.
A great option to have for excess 529 funds but if aiming to seed child's. retirement, may as well just fund their Roth when they start working. Plus, retirement accounts don't count against them on their FAFSA. Whereas, any regular savings/investments in the child's name count against them at higher rate than parental assets.
A great option to have for excess 529 funds but if aiming to seed child's. retirement, may as well just fund their Roth when they start working. Plus, retirement accounts don't count against them on their FAFSA. Whereas, any regular savings/investments in the child's name count against them at higher rate than parental assets.
Posted on 5/17/25 at 8:15 am to SquatchDawg
You can have a 529 with any state, but I chose Louisiana for convenience, tax deductions, and the investments are good.
Congrats on having loving parents and theie belief on the importance of education, whether it be academic or a trade. That is a huge burden taken off your shoulders.
I like the 529 because it protects the $ from being taken from the kids in case of divorce or death. The widow risks settling down with a baw who does not have the same educational mindset, and could divert the savings to their own personal account.
My Dad got remarried. He was always a very giving and bring the family together on vacations kind of guy. New woman comes around and is reaping the benefits of his generosity, gets married, and then starts a rift with the kids saying that is their money and to stop taking handouts. The handouts she was referring to were simple family social events like Dad making reservations for Father's day and treating everyone to dinner. He was not writing checks to us every month. She wanted to split the bill. It went on an on for a couple years and finally my sister told her she did not understand the generational family dynamic we had of the Parents/Grandparents taking a lead with family education, get togethers, and social events.
My dad had the same educational mindset as your parents. He has yet to give a dime towards our kids education which is shocking considering his beliefs. I know its because of her. Lucky for me our family was blessed with a successful business and we are about 60% funded for college and high school. Should be 100% funded in 2-3 years.
Congrats on having loving parents and theie belief on the importance of education, whether it be academic or a trade. That is a huge burden taken off your shoulders.
I like the 529 because it protects the $ from being taken from the kids in case of divorce or death. The widow risks settling down with a baw who does not have the same educational mindset, and could divert the savings to their own personal account.
My Dad got remarried. He was always a very giving and bring the family together on vacations kind of guy. New woman comes around and is reaping the benefits of his generosity, gets married, and then starts a rift with the kids saying that is their money and to stop taking handouts. The handouts she was referring to were simple family social events like Dad making reservations for Father's day and treating everyone to dinner. He was not writing checks to us every month. She wanted to split the bill. It went on an on for a couple years and finally my sister told her she did not understand the generational family dynamic we had of the Parents/Grandparents taking a lead with family education, get togethers, and social events.
My dad had the same educational mindset as your parents. He has yet to give a dime towards our kids education which is shocking considering his beliefs. I know its because of her. Lucky for me our family was blessed with a successful business and we are about 60% funded for college and high school. Should be 100% funded in 2-3 years.
Posted on 5/17/25 at 8:43 am to SquatchDawg
If your kids have two funding sources for 529, maybe it would be better for your grandparents to fund the 529 and you, to the extent your kids have earned income, fund a Roth. They can get the contributions out of the Roth without penalty if they need it, but another ten years or so of earnings on a Roth could be a game changer at age 50.
Posted on 5/17/25 at 9:37 am to CharlesUFarley
Thanks for the info everyone! Now I just have to explain all this to mom and dad and help them get this all set up.
Also, completely blanked on the Roth rollover when I typed this up last night. However, given the cost of tuition I don’t think trying to figure out what to do with left over money is going to be an issue. I was just trying to figure out the most beneficial way for them to do this.
Also, completely blanked on the Roth rollover when I typed this up last night. However, given the cost of tuition I don’t think trying to figure out what to do with left over money is going to be an issue. I was just trying to figure out the most beneficial way for them to do this.
This post was edited on 5/17/25 at 9:40 am
Posted on 5/17/25 at 9:46 am to Mariner
quote:
New woman comes around and is reaping the benefits of his generosity, gets married, and then starts a rift with the kids saying that is their money and to stop taking handouts.
We had a similar but worse situation with my FIL. He had terminal cancer and had my wife to take care of handling all of his affairs and basically take care of him. Then he had a new lady friend that entered into the mix and sank her claws in him. The next thing we know there was an effort to move his assets into her name - which was basically the money that was funding his care. It was NOT pretty.
We ended up winning that fight but it was a lesson in how evil some people can be and vulnerable somebody at the end is when it comes to dealing with manipulative people.
Posted on 5/17/25 at 10:01 am to Zilla
quote:
piggy backing... I read you can convert $50k of a 529 to a roth for the kid... if so, wouldn't it make more sense to spend after tax money on college and save the $50k for kiddo's retirement ?
It would be nice but given the costs it’s going to be all hands on deck to get them established. I don’t have the cash flow to pay it all out of pocket…..especially when #2 gets going.
Posted on 5/17/25 at 10:47 am to Zilla
It’s 35k total and you can only move 7k a year for 5 years until it’s lifetime $35k moved in to the Roth. Along with other rules to know.
This post was edited on 5/17/25 at 10:49 am
Posted on 5/17/25 at 7:30 pm to SquatchDawg
quote:
We had a similar but worse situation with my FIL. He had terminal cancer and had my wife to take care of handling all of his affairs and basically take care of him. Then he had a new lady friend that entered into the mix and sank her claws in him. The next thing we know there was an effort to move his assets into her name - which was basically the money that was funding his care. It was NOT pretty.
We ended up winning that fight but it was a lesson in how evil some people can be and vulnerable somebody at the end is when it comes to dealing with manipulative people.
That is sad. I don't know how these evil people can sleep at night without a conscience.
Posted on 5/19/25 at 10:37 am to SquatchDawg
rich kid problems
Posted on 5/19/25 at 12:24 pm to basiletiger
He’s not a rich kid. He probably has $1000 to his name.
What he does have though is parents and grandparents that made good decisions and planned and saved for this over 17 years to give him a fighting chance.
What he does have though is parents and grandparents that made good decisions and planned and saved for this over 17 years to give him a fighting chance.
This post was edited on 5/19/25 at 12:27 pm
Posted on 5/21/25 at 7:38 am to SquatchDawg
"They’re both on state pensions and have amassed a substantial amount of money."
Posted on 5/21/25 at 7:55 am to basiletiger
Won’t he be taxed out the arse on Roth conversions?
Posted on 5/21/25 at 9:44 am to LSUtiger89
We are contributing monthly to both of our grandkids 529. They should each have 35k to start transferring to a Roth. They are 5 and 7. By the age of 18 they should be working somewhat.
If they don’t touch the money, they will have 1 million or so by the age of 62-65 assuming an 8% return.
That should be enough to fund about 20% of their needed 5 million
Of course, I will be long gone and they will probably blow it on something stupid
If they don’t touch the money, they will have 1 million or so by the age of 62-65 assuming an 8% return.
That should be enough to fund about 20% of their needed 5 million
Of course, I will be long gone and they will probably blow it on something stupid
Posted on 5/21/25 at 10:03 am to dallastiger55
quote:
Won’t he be taxed out the arse on Roth conversions?
529 to Roth is a tax & penalty free rollover.
Posted on 5/21/25 at 11:12 am to basiletiger
quote:
They’re both on state pensions and have amassed a substantial amount of money."
The trade off for making about 30% of the money working for the State for their whole careers. I was making as much at 30 as my mom did when she retired and as much as dad retired at by 40. Given his responsibilities with the State he’d have been a high 6 figure employee in the private sector.
But I won’t argue that those state pensions in the 1970s were pure gold for anyone that got in and stayed enough years.
As I said “good decisions”.
This post was edited on 5/21/25 at 11:15 am
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