‘I’m not wildly wealthy, but I’ve done well’: I’m 79 and have $3 million in assets. Should I set up 529 plans for my grandkids?

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Dear Quentin,

I am a 79-year-old grandfather of three grandchildren. We are thinking of setting up 529 accounts for each grandchild, who are now in the 8th, 9th and 11th grades. Should I do so now? My wife and I want to do what is best for our grandchildren.

I largely worked my way through school and believe that negatively impacted my grades. My wife is supportive of these efforts. I am not wildly wealthy, but have done well. I have just under $3 million in assets. I might live another 10 years, plus or minus.

I’m still married to my first wife. Any input would be welcome.

If you start early and take strategic steps – like utilizing tax-advantaged accounts – your kids can have hundreds of thousands of dollars by the time they become adults. Here’s how to build wealth for the next generation.

Grandfather

Related: ‘I thought about filing for conservatorship’: I bought a home with my elderly parents. They reneged on their promise to sell their house and repay me. What now?

Dear Grandfather,

I’m happy that you are still married to your first wife if you and she are happy about this fact. I quietly wonder if there is a “second” wife on the cards, and where she might fit in. At 79, that would be quite a swerve, but not unheard of. Good luck with all of that! But back to your question. You and your first wife should go for it. Set up those 529 accounts tomorrow.

Assuming you share these grandchildren, it’s more likely that you and your wife will be on the same page regarding your grandchildren’s education. The three things, as a parent or grandparent or, indeed, as a society, you can give the next generation — something they will thank you for — is education, education, education.

You have the ability to create three healthy 529 accounts for your grandchildren, which will do more than just help pay for their education, it will give them the expectation that they will have a college education. Instilling that belief in a young mind is priceless, particularly in families where the older generation did not have the same educational opportunities.

These 529 plans will do more than just help pay for their education, it will give them the expectation that they will have a college education.

It’s the best way you can spend extra money. By all means, make sure you have funds set aside for the remainder of your life and for your wife’s life too; have an emergency fund for unexpected expenses (should your house get damaged by a storm or you or your wife need medical or long-term care). When you have run the numbers, set up those 529s.

Schwab Intelligent Portfolios Premium says 529 accounts are very useful for a variety of reasons. They include full control: “You’re the account owner. You (not your child) have control of when and how your money is spent, even after the person you’re saving for becomes an adult.”

And flexibility: “Funds in the account can be used for qualified higher-education expenses (including tuition at a variety of establishments such as: college, university, trade school, vocational school, and apprenticeship programs). You can also use your 529 assets for K–12 tuition of up to $10,000 per student per year at a public, private, or religious school.”

They also have tax advantages: “The annual gift exclusion amount also applies to a 529 account. However, you may be able to deduct your 529 plan contributions on your state income tax return up to your state’s limit,” Schwab adds.

You can also set up custodial accounts, opened under the Uniform Transfer to Minors Act or the Uniform Gifts to Minors Act, for your grandkids.

And growth: “While your money is in the account, it benefits from tax-deferred growth (no taxes due on investment earnings/gains). When money is withdrawn for qualified education expenses, withdrawals are federal income tax-free.”

You can also set up custodial accounts, opened under the Uniform Transfer to Minors Act (UTMA) or the Uniform Gifts to Minors Act (UGMA), for your grandkids. What’s more, custodial accounts are also common investment vehicles for children. With these types of accounts, you can take advantage of the annual gift exclusion amount, which for 2025 is $19,000 per person, without any of it being subject to a gift tax.

A word of caution: Any money you deposit in such an account is an irrevocable gift, meaning you cannot take it back and that the funds have been removed from your estate. The courts have ruled that 529 plans, which parents use to save for their children’s or grandchildren’s education, are the child’s property, even though they’re in a parent’s name, according to the law firm Goldsberry, Portz & Lutterbie , which reviewed a range of such cases across the country.

Here’s to the next 10 years, and beyond.

Related: ‘Her crooked son has taken everything’: My fiancé’s 100-year-old aunt was swindled out of $100,000. How can we help?

You can email The Moneyist with any financial and ethical questions at qfottrell@Single Sparkle, and follow Quentin Fottrell on X, the platform formerly known as Twitter.

The Moneyist regrets he cannot reply to questions individually.

Previous columns by Quentin Fottrell:

My mother-in-law has done some shady stuff’: She wants to sell air rights to her home and cheated her grandchildren out of their inheritance

‘Punishing myself would not help’: My credit card was stolen — the thief revealed lots of nasty surprises about my finances

‘We’ve had our ups and downs’: My late in-laws left their estate to me, my husband and our son. Do we need to hire an attorney?

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