Whether you're a grandparent or have blessed your parents with the joy of grandchildren, this update

is tailored just for you!

Recent adjustments to the FAFSA (Free Application for Federal Student Aid) guidelines have

significantly boosted the appeal of 529 savings plans owned by grandparents (or other relatives:

Aunts, Uncles etc) for college funding. Here's a breakdown of how these plans are treated as assets

under the current rules for the 2024/25 school year:

● Grandparent-owned accounts: A 529 plan under the grandparents' name, or any relative other

than the student or their parents, doesn't affect the student's FAFSA at all.

● Student-owned accounts: The student's 529 plan is considered part of their personal assets,

with the Student Aid Index (SAI) — formerly known as the Expected Family Contribution (EFC)

— being calculated at 20% of the account's value.

● Parent-owned accounts: Up to 5.64% of the 529 account value is included in the SAI

calculation. Student Aid Index (SAI)

Prior to the 2024-25 academic year, withdrawals from a grandparent-owned account were treated as

the student's income, affecting the FAFSA by up to 50%. The revised guidelines have eliminated this

issue, making grandparent-owned 529 plans a much more attractive option.

Key Points to Consider for Grandparent-Owned 529 Plans:

● Contributions up to $18,000 per beneficiary are eligible for the annual gift tax exclusion in

2024. For married grandparents, a joint contribution of $36,000 won't be counted towards

their taxable estate.

● Grandparents can "superfund" a 529 Plan, spreading a lump-sum contribution of between

$18,000 and $90,000 over five years to maximize their gift.

● If the student might attend a private college, be cautious. Many such institutions use the CSS

profile, which could still negatively impact financial aid eligibility if the grandparents own the

529 account. A comprehensive list of colleges using the CSS can be found online at

https://profile.collegeboard.org/profile/ppi/participatingInstitutions.aspx

● In California, where we're based, there's no income tax deduction for 529 contributions.

However, some states offer this deduction. It's crucial to understand your state's regulations

and whether grandparents are eligible for these deductions. Also, consider whether it's worth

forgoing the parents' tax benefits.

https://www.savingforcollege.com/compare-529-plans/state-tax-deductions

● Trust is paramount. Not all parents may manage finances responsibly. Before deciding to

place a 529 in someone else's name, reflect on the potential loss of control over the funds

intended for your grandchild's education.

Should you have further inquiries about college savings or know someone who could use this

information, feel free to share this post. We're here to support you and your community, and we value

your referrals.

Have someone who you think we should reach out to? Click here to pass along their information:

https://www.lawealthmanagement.com/referral

“An investor's or a designated beneficiary's home state may offer state tax or other benefits that are only available for investments in that state's qualified tuition program. An investor should consider the investment objectives, risks, and charges and expenses associated with municipal fund securities before investing. More information about municipal fund securities is available in the issuer's official statement. The official statement should be read carefully before investing. This and other information can be found in the current program description, which can be obtained from your investment professional. The availability of such a state tax or other benefits may be conditional on meeting certain requirements.”