A few years back I opened a 529 plan for each of my grandchildren. I am the owner and each grandchild is the beneficiary. The amount in the accounts is approximately 5K and 3K respectively (perhaps not enough to worry about). The grandchildren are 15 and 10.
I have since learned that distributions from a 529 plan owned by a grandparent will reduce eligibility for need-based aid by as much as 50% of the amount of the distribution.
It occurs to me that I could change the beneficiary designations to my daughter who still has higher education loans and let her use the funds to reduce her loans. Up to $10,000.00 per year.
There are no tax consequences or penalties when a 529 plan beneficiary is changed to a member of the beneficiary’s family. Qualified family members include the beneficiary’s:
-Son, daughter, stepchild, foster child, adopted child or a descendant
-Siblings or step-siblings
-Father or mother or ancestor of either, stepmother, stepfather
https://www.savingforcollege.com/articl ... r-529-plan
Simultaneously my daughter would open a 529 plan for each of the grandchildren. She would be the owner of the plans and I can fund them through the sale of EE bonds. The sale of the EE bonds will be tax free since the proceeds from the redemption were deposited to the 529 plans within 60 days of redemption.
Thanks for reading, and your thoughtful replies.
If a 529 plan is reported as a parent asset on the FAFSA, it will reduce eligibility for need-based aid by as much as 5.64% of the asset value.