September 7, 2008 is National Grandparents Day, commemorating the soft laps, smuggled treats and big warm hugs from the folks who know how to give them better than anyone else, our grandparents.
Nobody loves you quite like your grandparents do, but while the bottomless soft spot for the grandkids might not extend to their college fund, there’s a good chance it should. For grandparents in a position to help grow the grandkids’ college funds, the gift of college savings can be a real win-win.
Investment advisor and personal finance author Kevin McKinley has listed some of the reasons grandparents might find 529 plans attractive. The number one reason? No big surprise, the tax break. But for senior grandparents (or great-grandparents!) the gift exclusion has a particular relevance, as assets transferred to a student through a 529 do not face an estate tax when the gift-giver dies.
Kevin also outlines reasons why grandparents might want to open their own 529s, with the caveat that it may affect how certain government benefits such as Medicaid are distributed.
As an aside, I should note that one of the grandparents on our site recently asked us about “a rumor” he had heard regarding grandparents who pay their grandchildren’s college tuition directly to qualify for the tax deduction on college expenses. It sounds good, but some digging around online indicates it’s probably too good to be true, for most grandparents, the best bet is to help the grandkids now with the gift of college savings.
Tags: 529, grandparents, taxes