The Smartest Way Grandparents Can Help with College Savings

As higher education costs continue to rise, more families are turning saving for college into a family affair. A 529 plan makes it easy for others to get involved because everyone who wants to contribute can, regardless of who owns the account. For grandparents, this can be a satisfying and simple way to help grandkids pay for higher education.

Superfunding an Account

One of the biggest reasons for grandparents to contribute to a 529 plan is the option to “superfund” an account. When grandparents give their grandchildren a monetary gift, they may face a federal gift tax that sets a limit on the amount an individual or family can gift before facing a tax consequence. This amount changes from year to year. A 529 plan has unique rules that allow individuals to superfund an account by making a lump-sum contribution of up to five times the annual gift tax amount as if it were contributed over the next five years. It’s important to note, no additional gifts can be made to the beneficiary during that time, and individuals should talk with their financial advisors about their unique situations.1

The benefit to superfunding a 529 plan is that the money is in the account longer, giving it a few extra years for potential growth.

Contributing with GiftED

Another way to contribute to a college savings account is with the GiftED Program. Whether it’s a birthday, holiday, or other special occasion, there is never a wrong time to give the gift of higher education. To contribute, the account owner can simply log into their account and send a GiftED link to any family and friends. It’s then easy for family and friends to contribute directly from their bank account or to send a check through the mail. Families can find information on this process at here.

See how other grandparents have helped their grandchildren save for college by reading the Rzepka family’s story here.