• Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Masters Advisors

  • About Us
  • Our Approach
  • Our Services
  • Corporate
  • Blog
  • Contact
  • Client Log-in
Client Log-in Contact Us

The Master’s Minute

Helpful Tools and Tips

Maximizing College Gifts to Grandchildren

June 1, 2016 by Lyle E. Hershey

You probably don’t need me to tell you that the cost of college can be an enormous burden on a college student and his or her family.  Some fortunate students are in the envious position of having grandparents who have enough money to cover their own retirement years and still have something left to help family members pay for college.  There are tax advantages for grandparents who help their grandchildren pay for college; however, coordinating the timing of various strategies is crucial for maximizing the benefit to the student.

A grandparent-owned 529 college savings plan can be an excellent planning tool for those who are willing and able to assist their grandchildren with college funding.  Currently, $14,000 per year can be contributed to a 529 college savings plan without triggering a gift tax return.  In addition, up to $70,000 can be contributed in a single year to a single beneficiary by using a special IRS rule that allows you to aggregate the gift over five years. When maxing out a single year 529 contribution, no subsequent gifts can be made during the next five years.

When filing the FAFSA college financial aid application, a grandparent-owned 529 is not counted as an asset in the Expected Family Contribution (EFC) calculation.  However, when a disbursement is made from a grandparent-owned 529 plan, it is considered income of the student.  It is not taxable income, but it will count as income on the following year’s FAFSA.  President Obama recently signed an executive order that adjusted the way that distributions from grandparent-owned 529s impact a student’s future eligibility for financial aid.  These new rules will take effect for the 2017–2018 school year.  This change allows college students to use grandparent-owned 529 plans in both their junior and senior years without the distributions from these plans negatively impacting their opportunity for financial aid.  Prior to this rule taking effect, grandparent-owned 529 plans could only be used primarily during the student’s senior year without an accompanying negative impact.

The bottom line is that grandparents who want to invest in their grandchildren’s college education have tools and strategies available to them.  By careful planning and consideration of the payments’ timing, the students could receive valuable financial aid that might otherwise be missed.

Filed Under: Blog, Market + Industry

Primary Sidebar

Categories

  • Behavioral Finance
  • Blog
  • Client Service
  • Current Newsletters
  • Faith Integration
  • Financial Planning
  • General
  • Investing
  • Market + Industry
  • Master's Minute
  • Master's News
  • Personal Development
  • Strategy
  • What's the Point?

Search Blog

Archives

Footer

Receive Master’s Minute Blog Articles Today

  • This field is for validation purposes and should be left unchanged.

480 New Holland Ave
Suite 7201
Lancaster, PA 17602

  • 
  • 

Contact Us

Albridge log in | Client log in

© 2023 Master’s Advisors • Developed by TinyFrog • Important Disclosures | Privacy Policy

Securities offered through Securities America Inc., member FINRA/SIPC. Master's Advisors is not affiliated with the Securities America companies. Advisory services offered through Securities America Advisors, Inc. This site is published for residents of the United States and is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security or product that may be referenced herein. Persons mentioned on this website may only offer services and transact business and/or respond to inquiries in states or jurisdictions in which they have been properly registered or are exempt from registration. Not all products and services referenced on this site are available in every state, jurisdiction or from every person listed. This communication is strictly intended for individuals residing in the states of CO, DE, FL, IL, IN, KY, MD, ME, NC, NE, NJ, OH, OK, PA, SC, TN, TX, VA, VT, WV, WY. No offers may be made or accepted from any resident outside the specific state(s) referenced. PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of the websites provided here, you are leaving this website. We make no representation as to the completeness or accuracy of information provided at these websites. The company is not liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third party technologies,  websites, information, and programs made available through this website. When you access one of these websites, you are leaving our website and assume total responsibility and risk for your use of the websites you are linking to. All images and Content Copyright © 2020 Masters Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore it is important to coordinate with your tax or legal advisor regarding your specific situation.

Securities America Form CRS

Check the background of this firm on FINRA's BrokerCheck.