What You Need To Know About 529 Education Savings Plans

If you have children or grandchildren in college, they are probably buckling down now to prepare for finals. For those planning for how best to pay for the education of younger children, grandchildren, or loved ones, this is an excellent time to prepare. Here are a few key facts about 529 education savings plans:

1. 529 Plans Owned By Parents Are Considered Assets Of The Parents.

Parent-owned 529 plans are considered assets set aside for education. In certain circumstances, there may be a more advantageous way to set up ownership of a 529 plan that results in a higher level of financial aid provided to the student.

2. 529 Plans Owned By Grandparents Are Treated Differently.

All student income must be reported on the FAFSA, the form used to apply for financial aid for education. When a grandparent withdraws funds from the 529 plan to help pay for school, those funds become student income. As half of the student’s income is classified as available to pay for college, funds from a 529 plan may significantly lower the amount of financial aid received.

3. Should Grandparents Transfer Ownership Of 529 Plans To Parents?

It depends. If grandparents are still contributing to the 529 plan, it is probably not the right time to transfer ownership. When you are ready to make distributions, however, it may be better to transfer ownership of the 529 plan before submitting the FAFSA.

When planning for a child’s education, every situation is different. If you have questions about planning for your children’s or grandchildren’s education or any other aspect of your estate or legacy plan, please contact us at (703) 448-7575.