Can Grandparents Open a 529 Plan?

Published November 24, 2025

Last Modified Date November 24, 2025

Grandparents have a special way of leaving a mark on their family's story. Beyond birthday cards and holiday gifts, many are looking for a way to give their grandchildren something that can last: the gift of education. A 529 college savings plan account is one of the simplest ways to do just that.

And yes—you absolutely can open a 529 account for your loved one. Whether you choose to start an account yourself or contribute to one that someone else has already set up, it can be a powerful way to invest in your family's future.

Understanding 529 Plan Ownership and Control

Almost anyone can open a 529 account—parents, grandparents, or even family friends. For grandparents, owning an account means you're in the driver's seat. You pick the investments, decide when money is used, and even choose a backup (successor) owner.

The main benefit of account ownership is control. The account owner has complete say over how the funds are invested and when they are used.

Parent-owned accounts count as parental assets on the FAFSA, but only a maximum of 5.64% of the account value will be considered. Beginning with the 2024-25 academic year, the FAFSA no longer factors in grandparent-owned 529 savings accounts, meaning grandparent-owned 529 assets and distributions will not affect their grandchildren's financial aid eligibility.

Gift Tax Rules and Contribution Limits

One of the most common questions grandparents ask is: how much can I contribute without triggering gift taxes? The IRS allows individuals to give up to the annual gift tax exclusion amount each year without filing a gift tax return. Contributions to a 529 plan count toward this exclusion.

For 2025, the annual exclusion is $19,000 per donor, per recipient (or $38,000 for married couples who elect to split gifts).

Superfunding a 529 Plan

In addition to annual gifting, grandparents can use a special 529 provision called superfunding. This allows a donor to front-load up to five years' worth of annual exclusions into a single year. For example, if a grandparent contributes $95,000 in 2025, it will be treated as $19,000 per year for the next five years. During that time, the grandparent cannot make additional contributions for that same beneficiary unless the grandparent exceeds the threshold. This strategy is popular for grandparents who want to make a meaningful impact on education savings while also reducing their taxable estate.

Direct Tax Benefits

On the state level, Illinois offers a direct tax benefit for 529 plan contributions. Illinois taxpayers can deduct contributions to an Illinois 529 Plan from their state taxable income. For grandparents this means that if they contribute to a 529 account, they can deduct up to $10,000 ($20,000 if married filing jointly) of their contributions on their Illinois state tax return.¹

Strategies and Considerations for Grandparents

Coordination is key. Grandparents should talk with parents about contribution timing, ownership, and distribution strategies.

Grandparents should also remember that almost anyone can contribute to a Bright Start 529 plan once it's opened. Even if a grandparent doesn't own the account, they can still make deposits, provide gifts for birthdays or holidays, and help the account grow over time.