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    Scared ****less eomrat's Avatar
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    College Saving for my Granddaughters

    Do 529's still make sense or is a UTMA generally as good an option? Grandaughters are 8, 2, newborn.
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  2. #2
    Registered User 7Seconds's Avatar
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    If you know the money will most likely be used for college the 529 is probably still the best option. I don't recall all of the details but I opted to use 529 for most but not all of the full expected cost of college for my 4 kids. I like the fact that I have full ownership of the funds, versus an UTMA/UGMA where the beneficiary owns the fund. A 529 is pretty flexible and can be used for any form of education expense and easily transferred to a wide variety of family members. If not used for education then you have to pay a tax penalty on the growth portion of the funds, plus taxes.

    If I recall, non-parental 529s have a different impact on financial aid than accounts owned by a parent. Probably should look into that aspect.

    The main benefit of a UTMA/UGMA is it also allows you to invest money in securities on behalf of a minor. It's also not restricted to education.


    529 is more flexible in terms of tax advantages and directing who gets the money, but more strict on how funds must be used to avoid tax/penalties. A UTMA/UGMA account will allow for more investment options and potentially more growth, but is taxable and can be used for any purpose.
    Last edited by 7Seconds; 02-29-2020 at 06:46 AM.
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    Main advantage of some of the college specific plans is locking in tuition costs at current rates avoiding future increases. That said there are downsides as well. I decided to just consider the principal investment balances of two Roth IRAs (mine and a spousal for wife) as the college funds for our kids. I have a defined benefit pension and other retirement vehicles (457 plan) so the Roths are just more bonus money for retirement. If they get scholarships etc then I’ll just keep the money invested. I think that anything in the kids name can have a negative effect on some financial aid things, but wouldn’t affect scholarships but then you are penalized if the money is not used or needed for education.
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    Originally Posted by 7Seconds View Post
    If you know the money will most likely be used for college the 529 is probably still the best option. I don't recall all of the details but I opted to use 529 for most but not all of the full expected cost of college for my 4 kids. I like the fact that I have full ownership of the funds, versus an UTMA/UGMA where the beneficiary owns the fund. A 529 is pretty flexible and can be used for any form of education expense and easily transferred to a wide variety of family members. If not used for education then you have to pay a tax penalty on the growth portion of the funds, plus taxes.

    If I recall, non-parental 529s have a different impact on financial aid than accounts owned by a parent. Probably should look into that aspect.

    The main benefit of a UTMA/UGMA is it also allows you to invest money in securities on behalf of a minor. It's also not restricted to education.


    529 is more flexible in terms of tax advantages and directing who gets the money, but more strict on how funds must be used to avoid tax/penalties. A UTMA/UGMA account will allow for more investment options and potentially more growth, but is taxable and can be used for any purpose.
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    Scared ****less eomrat's Avatar
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    Originally Posted by 7Seconds View Post
    If you know the money will most likely be used for college the 529 is probably still the best option. I don't recall all of the details but I opted to use 529 for most but not all of the full expected cost of college for my 4 kids. I like the fact that I have full ownership of the funds, versus an UTMA/UGMA where the beneficiary owns the fund. A 529 is pretty flexible and can be used for any form of education expense and easily transferred to a wide variety of family members. If not used for education then you have to pay a tax penalty on the growth portion of the funds, plus taxes.

    If I recall, non-parental 529s have a different impact on financial aid than accounts owned by a parent. Probably should look into that aspect.

    The main benefit of a UTMA/UGMA is it also allows you to invest money in securities on behalf of a minor. It's also not restricted to education.


    529 is more flexible in terms of tax advantages and directing who gets the money, but more strict on how funds must be used to avoid tax/penalties. A UTMA/UGMA account will allow for more investment options and potentially more growth, but is taxable and can be used for any purpose.
    Thanks for that. A big advantage as a Grandparent is that if I "own" the account, it is not consider as "Expected Family Contribution". Not sure how that works when it comes time to disburse.

    Still studying and kinda hoping college will be free by then.
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    My adviser told me that in no circumstances should you do an UTMA or UGMA and that was 10 years ago, I'm surprised they even exist now.

    I'm paying cash for my Son's tuition now, no 529 or anything. Doing my taxes now and I normally don't get a refund but paying cash for tuition = refund almost half of the tuition cost. Thanks for the American Opportunity Credit Uncle Sam!
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    RIP GST taf1968's Avatar
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    We did 529's for our two kids. Son is a FR and daughter starts in the fall at the same university. The 529 was a great way for us to save up. In retrospect, I wish I would have been a little more aggressive vs doing the age-based options for a good chunk of the time, but hindsight is always more clear. Age based options are more conservative overall. But you get the benefit of the investments and you can use the funds for either dependent.

    But we're just now starting to draw down on our son's and will start drawing down on the daughter's in the fall. It's amazing how fast that time went. You start saving a few hundred a month when they are a year or two old--and the next thing you know, they are starting college.
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