to do even more to help finance their grandchild's education.
In the past, any contributions or distributions from a grandparent's 529 college savings plan were subject to FAFSA reporting, potentially impacting the student beneficiary's eligibility for federal financial aid. The new changes, however, bring a breath of fresh air.
In this blog, you'll learn what has changed under the new rule and how grandparents can leverage it to support their grandchild's educational pursuits.
In the past, any contributions or distributions from a grandparent's 529 college savings plan were subject to FAFSA reporting, potentially impacting the student beneficiary's eligibility for federal financial aid. The new changes, however, bring a breath of fresh air.
In this blog, you'll learn what has changed under the new rule and how grandparents can leverage it to support their grandchild's educational pursuits.
Understanding the 529 Account
First things first — what exactly is a 529 college savings account? It's a special savings account designed to help individuals, including grandparents, set aside money for future college expenses. Contributions aren't fèderally tax-deductible, but the good news is that earnings within the account grow tax-free. When funds are withdrawn for qualified education expenses, they remain untaxed.
What The New Rule Changes
When the account owner is a dependent student or custodial parent, the total value of the 529 plan is reported as an investment asset on the Free Application for Federal Student Aid (FAFSA). Previously, if a grandparent owned the 529 plan, any distributions were considered untaxed income for the student, potentially affecting financial aid eligibility. The upcoming change eliminates this concern.
In a nutshell, a 529 plan owned by a grandparent will no longer require reporting on the FAFSA. Even more impactful is that distributions from this grandparent-owned 529 plan will not be deemed as untaxed income for the student. This opens up opportunities for grandparents to contribute to their grandchild's education without jeopardizing financial aid eligibility.
In a nutshell, a 529 plan owned by a grandparent will no longer require reporting on the FAFSA. Even more impactful is that distributions from this grandparent-owned 529 plan will not be deemed as untaxed income for the student. This opens up opportunities for grandparents to contribute to their grandchild's education without jeopardizing financial aid eligibility.
Maximizing Grandparent Contributions
It's important to keep the following in mind when you make contributions to a 529 account for a grandchild:
I Funds Must Be Used For Qualified Educational Expenses
Grandparents can use 529 plan funds for a range of qualified educational expenses, including tuition, room and board, books, supplies, laptops, and internet access. However, certain expenses like insurance, student health fees, transportation, and extracurriculars are not covered and may incur a ten percent penalty if 529 plan funds are used toward these expenses.
2 | The Annual Gift Exclusion
While grandparents can contribute to their grandchild's 529 plan, it's essential to be mindful of the federal annual gift exclusion, which is the amount of money a person can gift to someone else without needing to file a gift tax return.
Protecting The Life You Built Together
Maybe the institution of marriage isn't your thing or you and your partner are putting off marriage plans for the time being. Nonetheless, having a plan in place isn't something you want to put off until you're older. Chances are good that you've already begun to build a life together that's worth protecting.
Whether it's the charming house you turned into a home or the vintage car you spent countless road trips in, shared assets are more than just possessions — they're a part of your shared history. Including your partner in your estate plan ensures that these shared treasures are passed on smoothly, preserving the memories you built together.
And if you have children with your partner, Life & Legacy Planning takes on an even greater significance. If your partner isn't biologically related to your children and hasn't legally adopted them, there is no legal guarantee that your partner would be able to care for your children or even visit them if something happens to you.
Creating a Kids Protection Plan@ or your kids in your estate plan is an act of profound love and responsibility. By ensuring your partner has legal authority in matters of your children's well-being, you're displaying a commitment to everyone's future happiness and security.
Whether it's the charming house you turned into a home or the vintage car you spent countless road trips in, shared assets are more than just possessions — they're a part of your shared history. Including your partner in your estate plan ensures that these shared treasures are passed on smoothly, preserving the memories you built together.
And if you have children with your partner, Life & Legacy Planning takes on an even greater significance. If your partner isn't biologically related to your children and hasn't legally adopted them, there is no legal guarantee that your partner would be able to care for your children or even visit them if something happens to you.
Creating a Kids Protection Plan@ or your kids in your estate plan is an act of profound love and responsibility. By ensuring your partner has legal authority in matters of your children's well-being, you're displaying a commitment to everyone's future happiness and security.
Helping You Show The One You Love Just How Much You
Love binds us together — but proper estate planning, and specifically Life & Legacy Planning@ puts the love you have for your partner and your family into action. It's not just about assets and legalities; it's a declaration of your commitment and a promise to provide for your loved one even when you're no longer physically present.
After all, in matters of the heart, there's no gesture more profound than securing a future together.
If you want to show your partner just how much you love them, contact us today to learn more about our Life & Legacy Planning@ process to get started.
Schedule a complimentary IS-minute call using the link below.
After all, in matters of the heart, there's no gesture more profound than securing a future together.
If you want to show your partner just how much you love them, contact us today to learn more about our Life & Legacy Planning@ process to get started.
Schedule a complimentary IS-minute call using the link below.
This article is a service name], a Personal Family Lawyer@Firm. We clon 'tjust (Imft documents; we ensure you make informed and empowered decisions about life and death, for yourselfand the people you love. That's why wc offer a Lifc & Legacy Planning Session TM, during which you will get morefinancially organized than you've ever been before and makc all the best choicesfor the people you love. You can begin by calling our office today to schedule a Life & Legacy Planning Session TM.
The content is sourced from Personal Family Lawyer@ for use by Personal Family Lawyer@firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.