Attention all Grandparents! How to Save for Your Grandchild’s College Education

published September 12, 2023

Being a grandparent is an exciting and fulfilling role. From babysitting and going on family vacations, to being a pillar of comfort and support, you play a pivotal role in your grandchild’s life.

Ever dreamt of gifting them a gift that could last a lifetime? This National Grandparents Day, consider supporting your grandchild’s future with an Edvest 529 account.

Use an Edvest 529 Account

One of the easiest ways to save for a grandchild’s higher education is through a 529 college savings plan. Edvest 529 is Wisconsin’s direct-sold college savings plan that offers state and federal tax benefits. Remember, the early bird gets the worm – so why wait? We recommend saving as soon as possible, even as soon as a child is born, to take advantage of compound earnings.

Open an Edvest 529 Account in Your Name

With Edvest 529, Wisconsin taxpayers can deduct contributions from your Wisconsin state income taxes, and any earnings grow tax-deferred. Withdrawals are also tax-free when used for qualified higher education expenses, including: tuition, room and board, books, supplies, fees, and more.

Not only are 529 plans a good option for saving for higher education, but they can help with estate planning, too. Contributing to a 529 plan for a beneficiary, like a child or a grandchild, is considered a “completed gift” for federal tax purposes. This means that contributions, and any earnings in the account, are removed from your estate value, potentially reducing your estate tax liability. Details about contribution amounts can be found under “Legacy and estate planning” on our Gifting page.

And remember to add a successor to your account! A successor is the person who will assume all rights and responsibilities for your account in the unfortunate case that you pass away. This is an important step for all account owners to take when setting up a 529 plan.

Contribute to an Existing 529 Account

Your grandchild may already have a 529 account set up by their parents. Contributions to an existing 529 account can make the perfect gift for birthdays, holidays, and other special occasions and milestones. And they could last much longer than other traditional presents. With Ugift®, Edvest 529’s gifting platform, it’s easy to contribute at any time, for any occasion.

Another way to add to their savings is to create an informal matching contribution agreement between you and your grandchild’s parent. With that, grandparents agree to match any contribution a parent makes to the college savings account. That way, contributions are doubled and can grow over time!

And by contributing through a parent-owned account, you can still take advantage of the favorable gift-tax treatment on your contributions.

Whether opening your own account, or contributing to an existing account, grandparents can play an important role in helping the next generation achieve their educational goals. With a 529 plan, you can build an educational legacy for your grandchild while taking advantage of tax and estate planning benefits.

Grandparents 529 Plans & Federal Financial Aid

In the past, money withdrawn from a grandparent-owned 529 plan was considered untaxed income for the student which could potentially reduce the student's eligibility for financial aid. However, thanks to upcoming changes to the Free Application for Federal Student Aid (FAFSA), grandparents can avoid the “financial aid trap” and contribute to their grandchildren's education without negatively impacting their financial aid eligibility.

Under the new FAFSA rule, rolling out in December 2023, grandparent-owned 529 plans will no longer be counted as untaxed income for the student. Note: The FAFSA is usually released in October of each year, so the December date release date is subject to change – be sure to keep an eye out for any updates.

Start Saving for Your Grandchild’s Education Today

Now is the best time to start saving for your grandchild’s higher education. And with Edvest 529, you get a tax-advantaged way to save for college and other higher education expenses in a flexible and simple plan.

To learn more or get started, visit Edvest.com.

About Edvest 529

For more than 25 years, Edvest 529 — Wisconsin’s direct-sold 529 college savings plan — has been helping families save for higher education expenses. Account owners can choose from 24 investment portfolios, access easy-to-use savings tools, and take advantage of in-state tax benefits for Wisconsin taxpayers.

Edvest 529 is a tax-advantaged investment, meaning contributions to an account may qualify for a 2024 Wisconsin state income tax deduction of up to $4,000 per beneficiary, per year (married couple filing separately and divorced parents may each claim a maximum of $2,000). Limitations apply. The plan has no sales charges, enrollment fees, or annual account maintenance fees. In fact, Edvest 529 is the fifth lowest-cost 529 college savings plan in the nation!1

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To learn more about Wisconsin's Edvest 529 College Savings Plan, its investment objectives, risks, charges and expenses see the Plan Description at Edvest.com. Read it carefully. Investments in the plan are neither insured nor guaranteed and there is the risk of investment loss. Check with your home state to learn if it offers tax or other benefits such as financial aid, scholarship funds, or protection from creditors for investing in its own 529 plan. If the funds aren't used for qualified higher education expenses, a federal 10% penalty tax on earnings (as well as federal and state income taxes) may apply. Consult your legal or tax professional for tax advice. TIAA-CREF Individual & Institutional Services, LLC, Member FINRA, distributor and underwriter for the Edvest 529 College Savings Plan.

The treatment of investments in a 529 savings plan varies by school. Assets are typically treated as the account holder’s and not the student’s. (Student assets are generally assessed at 20% whereas parental assets are generally assessed at 5.6%.) Any investments, including those in 529 accounts, may affect the student’s eligibility to get financial aid based on need. You should check with the schools you are considering regarding this issue.

Footnotes

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