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Which investment option in the 529 plan should I choose for my grandchild?
Thatís up to you to decide. Most 529 savings programs offer a menu of options from which to select, ranging from conservative fixed-income options to more aggressive equity options. Although every investor is different, we find that many grandparents tend towards the more conservative options, because their primary objective is to keep the principal safe, not to maximize investment returns. (Many parents seem compelled to select more aggressive options thinking that they must reach a certain target level of savings.)
The most popular option in many 529 plans continues to be the ďage-basedĒ option that automatically adjusts to a more conservative asset allocation as the beneficiary gets closer to college age. This may be an appropriate choice for many grandparents.
Prepaid tuition plans are also a popular choice for grandparents. State-sponsored prepaid tuition plans are available in a limited number of states and most of them have residency requirements. Independent 529 Plan is the prepaid tuition plan established by a consortium of over 270 private colleges (perhaps your alma mater is among them).
- How can I select the right 529 plan if I donít know where my grandchildren will be attending college?
- What happens if I have money in a 529 account for a grandchild who later decides to not attend college?
- I would like to put some money towards my grandchildrenís college savings, but Iím worried about unplanned medical expenses or other financial needs I may have later on. Can I get my money back out of a 529 plan?
- Which investment option in the 529 plan should I choose for my grandchild?
- We have 16 grandchildren below college age. Should we set up a separate 529 account for each of them, or can we combine the savings into just one account?
- Instead of opening my own 529 accounts, can I just make contributions to the 529 accounts my children have already established for my grandchildren?
- How do Coverdell education savings accounts compare to 529 plans?
- If I ever need to go to a nursing home and apply for Medicaid benefits, will the 529 accounts I have set up for my grandchildren be counted as part of my assets?
- What happens to my 529 plan if I die or become incapacitated?
- Am I hurting my grandchildís eligibility for financial aid by putting money into a 529 plan for him?
- My tax adviser is recommending 529 plans as an estate-planning vehicle. What is the advantage?
- Iíve been making direct gifts to my grandchild each year into a custodial account (UTMA) with the understanding that those funds are to be used for college. Is there anything wrong with this approach?
- My estate planner tells me I can reduce my estate by paying my grandchildrenís tuition and not even have to worry about the gift tax. So why should I use 529 plans?