Grandparent-owned 529 plans?

[TBH]

Feedback requested!

My inlaws inherited some money recently and have announced that they'd like to divide it up between their 3 grandchildren to be used for college savings. Their financial advisor told them that some private colleges are starting to consider 529 accounts owned by the parents but with the child as beneficiary to be the CHILD's assets, not the parent's, for financial aid calculations. So their advisor said it would be in our best interest to leave the $$ in the grandparents' names. They've asked us whether we'd like to have the money to put into the 529s we already have set up, or whether we'd like them to keep it in their names.

All things being equal, of course I'd rather have the money in our 529s so I can invest it how I want to and monitor how it's growing. But I don't want to lessen my son's chance of being eligible for aid. I have no idea if he'll be eligible or not, but I'd like to keep the option open.

Thoughts? Is it true that keeping it in the grandparents' names is a better move for financial aid calculations? Does it matter?

The other thing is I have absolutely no idea how much money it is. I think it's probably at least a couple thousand, but I don't know even a ballpark figure. My son is only 3, however, so even a couple thousand will make a nice difference in 2021 when it's time for him to enroll.

[sweeps]

The federal rules have changed recently and all 529 plans (both the savings type and the prepaid tuition type) are classified as the parents' assets. I agree with you, I have asked my parents and in-laws to allow me to deposit the money in my own 529. That way I know exactly what I have and how it's invested.

Sorry for being cynical, but is your in-laws' financial advisor recommending that they fund the 529 themselves so he can earn a commission?

[MonkeyMama]

I have to agree with Sweepsplayer. & personally I do not see with a 529 plan with a child's name on it, how it can not count towards their college money. If not, what is wrong with the system? Money sitting there for college that isn't counted towards assets available for college???

Anyway, dh's mother invested in a 529 with our ex-crappy broker. Another bad investment. I don't care because I don't intend to save specifically for college and with a family who has done fine putting ourselves through public college, that is about what I Expect for my kids. Dh's parents saved about $30k for his college that he never used and that worries me, setting something specific, plus all the fees and the questionable broker. But it is their thing, I just personally encourage them not to set aside too much, to be open to using it for the other grandkids, and made clear they did not need to open another 529 for our other son. It will be great to have a little extra college money - he is 3 with $3k already. But overall I am not that thrilled with it because dh's parents are not good investors. & i Can easily see them building up way too much than will be used for college. I strongly encourage them not to put more money in there and to give it to me instead to manage for the kids if they really want to help.

But yeah - sounds like a commission thing. my in-laws don't get why I Am not falling over with glee with their little 529 plan. I just see it as one more way they are rewarding their really terrible broker- blah.

[TBH]

I'm starting to think more like you MonkeyMama. When I was pregnant, saving for college was something I fixated on. It's good for my free-ranging anxiety to have a place to hang its hat. So we've got an investment 529 and a prepaid plan. The prepaid plan was mostly a concession on my part because my partner is suspicious of the stock market and was only comfortable with an extremely conservative investment--hence the pre-paid plan. I made sure we could use the $$ at any college, however, and the fees are reasonable, so it's not as bad as it could be.

The investment plan is growing nicely, because various relatives have contributed to it. It's at Fidelity, and I put in $50/month because if I do that I avoid an annual fee. Once it's over 20K, the annual fee disappears, and I will probably stop adding to it and just let it compound. I know it's silly to have an autodeposit to avoid the annual fee, but I just can't stand paying annual fees. Really I should be putting that $50/month toward retirement.

I think I'm going to call Fidelity and get more details on the fees, and then I'll probably ask the inlaws to just send us the check. I don't think their broker is angling for fees. I don't even think it's a broker--I think they paid for a one-time consultation with a financial advisor. I could be wrong, but my inlaws are generally pretty savvy so I don't think they're being manipulated.

The other thing is that since it's coming from my partner's parents, I feel it shouldn't go into the 529 that I own. It should go into a 529 with HIS name on it. So it would mean we'd have to open another investment 529, and then we're potentially dealing with more fees. ARG. This is so complicated. Don't even get me started about the UGMA account somebody gave our son when he was born.

But really, everybody should have my problems. My 3 year old is worth more than many adults. I am grateful that the family can help and wants to help us provide for him, but it gets so complicated.