Maryland Blogger: Grandparents upset with 529 college saving plans

Grandparents upset with 529 college saving plans

Grandparents upset with 529 college saving plans


Many grandparents like to set up college savings accounts for their grandchildren. Some have used the popular 529 college savings plans without fully understanding some of the possible results. Sadly, funds from these grandparent owned accounts are counted as direct income for the grandchildren and carry a 50 percent penalty against aid whereas parent owned accounts reduce eligibility for need based financial aid by a maximum of 5.64 percent.

If you are a grandparent, you should seek professional advice before setting up college savings plans for grandchildren.


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Roy Kelley, Associate Broker

Realty Group Referrals (Retired from RE/MAX Realty Group)

6 Montgomery Village Ave., Suite 200

Gaithersburg, MD 20879

Main Office:  301-258-7757 (You will not reach me at this number)

Send an email message if you need my phone numbers. I will be happy to recommend a real estate professional if you are moving to the area.

Comment balloon 17 commentsRoy Kelley • May 27 2018 10:42PM


Good morning Roy - no grandchildren yet but will have to consider this.  Thanks for sharing. 

Posted by Grant Schneider, Your Coach Helping You Create Successful Outcomes (Performance Development Strategies) 9 months ago

Good morning, Roy Kelley wow...a 50% penalty is quite a whack....

Posted by Barbara Todaro, "Franklin MA Homes" (RE/MAX Executive Realty ) 9 months ago

Thank you for the information. I was not aware of it.

Posted by Gita Bantwal, REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel (RE/MAX Centre Realtors) 9 months ago

Great advice, Roy, to seek professional help on how to set up college funds for grandkids... been there and done that... and fortunately at the end of that process now. 

Posted by Nina Hollander, Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor (Coldwell Banker Residential Brokerage ) 9 months ago

Good morning Roy. First grandchild due June 2! Timely advice! Thanks. Enjoy your day!

Posted by Wayne Martin, Real Estate Broker - Retired (Wayne M Martin) 9 months ago

Excellent advice, Roy.  There are other more beneficial ways of accomplishing this goal.

Posted by Gabe Sanders, Stuart Florida Real Estate (Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales) 9 months ago

Good morning Roy Kelley ,

Obtaining the advice of a financial adviser is very important concerning accounts like this. We were told by ours the parents should set it up and we can contribute as often as we want which we do!

Posted by Dorie Dillard CRS GRI ABR, Serving Buyers & Sellers in NW Austin Real Estate (Coldwell Banker United Realtors® ~ 512.750.6899) 9 months ago

Roy, goodness, that is quite the penalty, and sad grandparents cannot save for their grandkids.

Posted by Joan Cox, Denver Real Estate - Selling One Home at a Time (House to Home, Inc. - Denver Real Estate - 720-231-6373) 9 months ago

Roy, very important information you shared. You're right, it's best to consult with an advisor before making these decisions. 

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group) 9 months ago

I should look into this more, as I setup a 529 plan for my niece and nephews, which is different than if a parent or grandparent did.

Posted by Brian England, MBA, GRI, REALTOR® Real Estate in East Valley AZ (Arizona Focus Realty) 9 months ago

That is incredible - that's a terrible tax hit. I had no idea - the kids have set up accounts for the kids and we just send money - and they deposit it, hoping it's different. I will check. D 

Posted by Debb Janes EcoBroker and Bernie Stea JD, REALTORS® in Clark County, WA (ViewHomes of Clark County - Nature As Neighbors) 9 months ago

Good timely post - as we head into graduation season and some grandparents are thinking of gifting their middle school  grandchildren with these types of accounts.

Posted by Michele Cadogan-Cell 917-861-9166, Licensed Real Estate Associate Broker - (Fillmore Real Estate 2926 Ave J Brooklyn NY 11210) 9 months ago

Wow, I had no idea. I used these savings for my kids college too. 

Posted by Inna Ivchenko, Realtor® • Green • GRI • HAFA • PSC Calabasas CA (Barcode Properties) 9 months ago

Grandparents should seek the advice of a financial expert. The tax implications are great.

Posted by Debbie Reynolds, Your Dedicated Clarksville TN Real Estate Agent (Platinum Properties) 9 months ago

The advice that Dorie received is correct. It better for the parents set up the account and the grandparents can contribute to it.

Posted by Roy Kelley (Realty Group Referrals) 9 months ago

Thank you very much for your comments. It is always good to hear from you.

Posted by Roy Kelley (Realty Group Referrals) 9 months ago

The Main Street Farmers and Artists Market is open Saturdays, year round, from 9 a.m. to 2 p.m. You’ll find it in the Main Street Pavilion at 301 Main Street, one block off of Kentlands Boulevard, with several local farms, kitchens, and a variety of local artists with unique handcrafted items. Products available for purchase include a vast assortment of fruits and vegetables, jams and jellies, various herbs, cut flowers, and potted plants, baked goods, crab cakes, dog treats, meat, eggs, and honey. Our arts and craft vendors sell jewelry, photographs, health and beauty products, blown glass, knitted items, quilts, purses, woodworking items, clothing, children’s accessories, yard art, and more!

Posted by Roy Kelley (Realty Group Referrals) 6 months ago