529 Plan for Grandchildren – Can Grandma (or Other Family) Help?

Happy 5.29 to all who celebrate – and everyone with a young student in their life should probably celebrate! We’ve covered 529 plans previously on the blog, but you might be wondering whether it’s a concern for family members outside of parents. For example, can you take out a 529 plan for grandchildren? Can aunts and uncles contribute? We’re joined again by guest blogger, CERTIFIED FINANCIAL PLANNER™, Nichole Coyle to explore some ins-and-outs of educational savings.

As a financial planner, one of the most common questions I get from parents and grandparents alike is: “How can I help save for my child’s (or grandchild’s) college education?” A 529 plan is often at the top of my recommendation list—not only for its tax advantages but also because it makes it easy for the entire family to pitch in.

Let’s talk about 529 plans for grandchildren – how these plans work and how Grandma (or any other family or friends) can get involved in helping to set up a strong foundation for a child’s future education.

What Is a 529 Plan?

A 529 plan is a tax-advantaged savings plan designed to help pay for education expenses. The most common 529 plans are sponsored by states and offers quite a bit of flexibility. 529 plans allow funds to be used for tuition, fees, books, room and board, and even up to $10,000 annually for K–12 tuition.

Key benefits of a 529 plan include:

• Tax-Free Growth: Earnings grow free from federal income taxes, and withdrawals used for qualified education expenses are also tax-free.
• High Contribution Limits: Most 529 plans allow substantial contributions—often well over $300,000 per beneficiary.
• Minimal Impact on Financial Aid: Assets in a parent-owned 529 typically have a relatively low impact on a student’s financial aid eligibility.
• Flexibility: If the original beneficiary doesn’t use the funds, the account owner can transfer it to another eligible family member. Additionally, as of 2024 up to $35,000 can be rolled over from a 529 plan to the beneficiary’s Roth IRA!

How Can Family Members Contribute?

Here’s the good news: anyone can contribute to a child’s 529 plan. That means grandparents, aunts, uncles, godparents, or even close family friends can help fund a child’s future by making direct contributions.

There are a few ways this can work:

• Contribute to an Existing Plan: If parents have already set up a 529, they can simply share a link or contribution instructions with family members. Many state-sponsored plans now offer easy online gifting tools or printable gift certificates for special occasions.
• Open Their Own 529: Grandparents or other relatives can open a 529 themselves with the child as the beneficiary. This gives them control over the funds and how they’re invested.
• Front-Load Contributions: For those in a strong financial position, a unique feature of 529 plans allows a contributor to give up to $95,000 per beneficiary in a single year (in 2025, as indexed for inflation) without triggering the federal gift tax, as long as the contribution is treated as if it were spread over five years. This can be an excellent estate-planning tool as well as a major educational gift.

Why It’s Helpful to Include the Whole Family

Let’s face it, college isn’t getting any less expensive. Getting the entire family involved in saving can make a huge difference. Even small, consistent gifts from relatives over time can add up significantly, especially with the power of compound growth.

Plus, when family members contribute to a child’s education, it sends a powerful message: we believe in your future. This emotional and financial investment can be just as meaningful as the dollars themselves.

529 plans are one of the most effective tools we have to prepare for education costs and they’re not just for parents. Grandparents and other loved ones can play an active role in supporting a child’s education dreams in a tax-efficient and emotionally rewarding way.

529 Plan for Grandchildren – Get Started Today

If you’re a family member wondering, “Can I help?” the answer is absolutely! And if you’re a parent, don’t hesitate to share your child’s 529 plan information with your family. You might be surprised who’s eager to contribute.

If you’d like to explore your options or have questions about the best way for your family to get involved, let’s schedule a time to chat.

Nichole Coyle, CFP®, CSLP®

Managing Partner, Financial Planner

2300 St. Clair Ave NE

Cleveland, OH 44114

216.621.4644 x1607 office

330.607.2213 cell

nichole@impactcfp.com

Securities and advisory services offered through Cetera Advisor Networks LLC, member FINRA/SIPC, a Broker-Dealer, and a Registered Investment Advisor. Cetera is not affiliated with the financial institution where investment services are offered or any other named entity.

Investments are: Not FDIC/NCUSIF insured * May lose value * Not financial institution guaranteed * Not a deposit * Not insured by a federal government agency.

All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. This information is found in the issuer’s official statement and should be read carefully before investing.

Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult their financial or tax advisor before investing in any state’s 529 Plan.

Posted In: Guest Blog, Saving, Sparky's Kids Club