529 Plans for Grandparents

Grandparents can open a CollegeInvest 529 Savings Account in their own name, naming the grandchild as the beneficiary.

Yes! In fact, this is quite common. There are no restrictions on the number of accounts for a specific Beneficiary.

A Beneficiary is the person of your choosing who is entitled (by the Account Owner) to the benefits of the savings. You can change your Beneficiary at any time. Just log in to your account and complete the required form or contact your Plan Manager directly.

It is possible to transfer a child’s 529 Savings Account to a grandchild under certain circumstances. Generally, the account owner, who is often the parent, has the authority to change the beneficiary of the 529 Savings Account to another eligible family member, including a grandchild. However, it’s essential to review the specific rules and procedures outlined by the 529 Savings Account provider to ensure a smooth transfer process. Additionally, tax implications and potential penalties may apply, so it’s advisable to consult with a financial advisor or tax professional before initiating any transfers.

No, currently only a parent or legal guardian can apply for the program. Also, future contributions must come from the parent or legal guardian to qualify for the incentive match. For more information about the First Step program, click here.

• Tuition
• Required fees, books, and supplies
• Certain room and board expenses, or off-campus rentals
• Computers (desktops, laptops, or tablets) and peripheral equipment (such as mice, keyboards, printers, scanners, and monitors) used solely by the student
• Software (educational based)
• Internet access for primary use by the student (excluding the bundled costs of phone, cable, and/or pay TV services)
• Apprenticeships

You may use your funds at postsecondary educational institutions, across the country or even internationally, as long as they participate in a student aid program administered by the U.S. Department of Education, including:

• Community colleges
• Public and private four-year colleges and universities
• Graduate and postgraduate programs
• Vocational and trade schools
• Apprenticeships

For the most recent list of eligible schools, click here.

You have three options:

You can simply leave the funds in the account should he/she decide to go back to learning. You can change the Beneficiary to another family member, or even yourself.

Or, you can withdraw the funds, subject to the tax consequences for nonqualified withdrawals. Generally, the earnings are subject to federal and state income taxes and a 10% penalty, and the possible recapture of any state income tax deductions.

Grandparents can make contributions to an existing 529 Savings Account. Ugift® makes it easy for grandparents to contribute online or by mail. Learn about gifting here.

Alternatively, you can open your own 529 Savings Account for your grandchild.

Grandparents can contribute up to the annual gift tax exclusion amount without incurring gift tax consequences, which is $18,000 per year per beneficiary as of 2024. Additionally, they can make a lump sum contribution of up to five times the annual exclusion amount ($90,000) per beneficiary in a single year without triggering gift tax, provided they don’t make any additional gifts to the same beneficiary over the next five years.

For Colorado taxpayers, contributions to ANY CollegeInvest savings account are eligible for a deduction from your Colorado state income tax return¹. This is a great way for grandparents and other family members to invest in their loved ones’ higher education goals, while also receiving Colorado tax deductions.

If you’re planning to claim the deduction on your Colorado income tax return, it’s important to report your gift or donation to your grandchild’s 529 account. CollegeInvest provides a secure form for self-reporting contributions, which is crucial for accurate tax reporting. By submitting this form, you ensure compliance with tax regulations for 529 plans, and reduce the chances of receiving inquiries from the Colorado Department of Revenue.