For years, common wisdom told grandparents to avoid contributing to 529 college savings accounts because they could count as student income on the FAFSA and hurt financial aid eligibility. But that’s no longer the case. That shift opens the door for grandparents who have wanted to contribute more but weren't sure if it would do more harm than good. Under new rules that took effect last year, distributions from grandparent-owned 529s no longer count as student income on the FAFSA. |
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For example, say a grandparent makes a $19,000 contribution today, the full annual gift tax exclusion for 2026. For a college-bound senior, that covers nearly a full semester at a public university. For a newborn, that money can be invested for years along with any other contributions. A 529 plan is just one tool for grandparents to review if they want to provide some education support to their family. If you want to explore in more detail, let’s start by looking at how this would fit into your overall financial strategy. |
This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm.
A 529 plan is a tax-advantaged education savings plan. Before choosing a plan, it's important to consider not only the state tax treatment but also any associated fees and expenses. Availability of a state tax deduction will depend on your state of residence, as state tax laws and treatment may vary from federal tax laws. If you make nonqualified distributions, earnings will be subject to income tax and a 10% federal penalty tax.