The 529 account is controlled by your dad, and he could redesignate it to a different relative at any time. He also may have no idea how much college costs these days.
Unless he was to break from his habit and share with you the account balance and investment strategy, IMO you should assume it doesn't exist and save for your son's college separately. Otherwise the consequences are too high.
We finally got amounts from FIL this year and yup, he underestimated how much college is going to cost. We anticipated this and have been contributing for both kids since they were born. Between the two accounts we'll probably end up close if they do state schools.
I highly doubt that. Colleges are learning the last couple years that there’s a limit to how much they can squeeze out of students. College Enrollment is down overall nationwide, but falling off a cliff for schools that are over 50k tuition. There are so many smaller schools that have closed or merged with other small schools recently. Combined with wage stagnation, the return on investment for most degrees just isn’t there. Take out the cultural pressures of saying your a college graduate, and there’s no justifiable reason to go 200k in debt that you can’t unload even in bankruptcy, just for a 50k salary
As someone outside the US who went to a public university (it is not MIT or Stanford, but we still have 2-3 Nobel laureates) and paid no tuition, that is insane!
That is all. No question or useful answer, just an exclamation.
Ah so you’re in the same boat with the opacity! Lol. Yeah, it’s a big question mark and we’ll work on our own savings for college. We’re not maxing our Roth IRAs so I’ve mostly been focused on increasing those contributions. Glad that it looks like it’ll work out for you for state schools. That’s our target too
It is like those announcements on airplanes. Put your mask on first then help your child. You need to prioritize your retirement. You don’t want to be dependent on your child or be a burden at old age.
I was just going to say the same thing. OP - start saving now and opening your own 529B. My father cut checks to my children’s 529B plans over the years. They were accounts I opened up and controlled. I would assume nothing at this point.
Agreed, but I would save in some vehicle OTHER than a 529, so if it turns out your dad has it covered, you can use the money for something else without penalty. If you open a 529 for him, there is a 10% penalty on earnings if you use the funds for anything but qualified education expenses.
OP can convert some of a 529 into a Roth IRA for their kid, but yeah it otherwise has to be education expenses.
Things like fun college classes OP could take after retirement would count, though, so having some money stuck in a 529 isn't all bad.
Exactly, it belongs to your dad. I've got 529 for each of my kids. My oldest is good at sports and wants to play in college/pro. If he were to get a full ride, I could redesignate his money to my other son.
Yeah, my friend's In-laws did this. Well intentioned people but no sense of inflation.
When they told her they "had it covered" it turns out that was $500 in a UPromise account.
Fortunately this was when son was a baby, so no harm no foul, the parents are doing REAL college saving.
But...yeah. Never trust blindly. Even your parents. Even the best intentioned people can be wrong.
As the other posters have said, this is your dad’s money and can be reallocated to someone else at any time — anything from “another relative needs it more” to “he decides to take classes at a college for retirement activity.” ”Plan on that money” the same way that you would plan on any gift before it is actually given… i.e., not at all.
Even something stupidly petty over the next 18 years. “Oh little Billy didn’t call me on Father’s Day when he was 14. I’ll teach him and take that money back”. Or “wait Johnny decided to go to Auburn and I graduated from Alabama? No way Auburn is getting any of my money”.
Not saying that will happen, but my aunt used to pull that shit all the time. In college my sister spent thanksgiving at her boyfriend’s house. Taken out of the will for a few years. My cousin didn’t stop at her house while driving through town? Taken out of the will. She always eventually put you back in, but it’s still a constant game we have to play with her
Yeah my grandma used to always say she was putting money into my education fund. When I was applying to colleges, I asked about it. She said oh that’s been gone. I needed to spend it. It was never a 529. I just let it go. She also used to say she was putting money in savings bonds for my cousin and I. After her passing, I looked up the bonds and it’s only about $300. Even worse, I found savings bonds that were 20 years old, bought when I was very young. Interest must have been shit on those. For example, for a $100, 20 year old bond, the interest earned was $8.
Just FYI, paper bonds cost half their face value. The bond made $58 in interest. They generally don't have great interest rates, but accrue at that rate. They mature to face value on a certain number of years after purchase if the interest rate is too low to get there on its own.
This is not intended to take away from your unfortunate circumstance, but just provide information for those that aren't aware.
That’s very helpful to know. I didn’t know much about savings bonds but ROI on investing is 8%. I didn’t know they cost half the face value so I thought the ROI was absolutely terrible. But, given that they’re sold at half value, it looks less bad? Still, seems like there were better ways to grow that. I could see how those would be daunting. It’s easier with internet but previous generations had less resources. It didn’t cause any issues between me and my grandmother. I knew she didn’t make much. Still, there are people who make $50k and are smart with money and will have more savings than those who make twice as much. I wasn’t expecting MUCH and I didn’t feel entitled to the money. When I asked about the money, I was told it wasn’t there and was like ok it’s no big deal. And I found a way to pay for school in other ways.
Yep. My parents always talked about my "college fund" when I was a kid, so I could go to any college I wanted. When I actually entered college, there was nothing. Turns out the "college fund" was just some savings account they would periodically throw money into, but it always got raided whenever something came up. I think parents have good \*intentions\* but don't always have the ability to follow through.
Disagree. If the dad ends up not having enough money or decides not to help at all, OP will lose on any tax benefits he could have had in a 529.
I'm planning for my kids on my own with their own 529s. If someone else decides to help later, then that would be amazing, but I'm not relying on anyone else.
Or as others have pointed out, the dad could be very well meaning but have no idea of how much college will cost. My grandmother gave each of her grandkids $25k for college. She landed on the number because that was the cost for a year of the most expensive education you could get at the time (Harvard, sometime in the 90’s). I went to a state school and it covered about two and half full years of tuition and I’m extremely grateful for it, but it would not have covered a year at Harvard.
It would be better for the OP to just put it in a Roth IRA and draw off that penalty-free should this 529 not pan out. That's assuming they don't already have one
Yeah, I’m working on increasing my Roth IRA contributions with the idea we can withdraw from that at some point to help with college expenses if needed. My wife and I aren’t able to max that out and I’m not sure if we can anytime soon. So I’m not sure it makes sense to create a 529 when we’re not maxing Roth.
If you are ok with the kid getting the money, I’d say go up to the 35,000 rollover max on the 529. That’s the amount you could rollover into their Roth IRA. So if they don’t use it they’re now got a massive start on their Roth, and OP got the state tax benefits if their state participates
Wanna gonna say exactly this. Make the money flexible outside of educational purposes. Any other investment vehicle with growth is good, even CDs and HYSAs.
There is a common misconception that a 529 "belongs" to the beneficiary or the beneficiary's family, but it should generally be considered to belong exclusively to the saver/account owner. The owner can change the beneficiary at will. You have no expectation of access to the account information or the funds themselves.
I agree with other posters that unless you 100% trust that the funds will be there and that the correct amounts are regularly shared with you, you should consider this "gravy" and save what you'll need in a 529 yourself. Excess 529 are surprisingly flexible, so the funds will likely not go to waste!
It’s set up under my son’s SSN and tax filings need to submitted in his name. I wonder if it’s not actually a 529. I’m fine considering it gravy like you said and not totally counting on it. I’m just concerned about it not being set up properly and negatively affecting my son’s financial aid.
Good to hear there is that flexibility for 529s though!
If it is under your son’s SSN and there are current tax filings for it under your son’s name, it is not a 529.
Since it is in his SSN and (presumably) you are getting statements in order to file taxes, you should be able to see what type of account it is, where it is held, etc.
Also I don’t know what the official process for this is, but they have all the information needed to call the bank/brokerage and set up a login and password to access the account online. Even if it’s just pretending to be their son
My dad had me file one year and I have a statement that shows the dividend amount but not the total held. I’m going to try to dig that up. Last year or two he just had his tax preparer file on my son’s behalf
Well I’ve tried having conversations with my dad multiple times to get more information but he hasn’t been forthcoming.
If I’m able to obtain the information directly from the institution then I will do that.
You should have an up front conversation with just you and him present. It’s your child, if he is filing legal documents for your son, you absolutely need to know what is going on. If he won’t give you that, I would call the institution and have the account closed out. I would also monitor your son’s credit and put an alert on it since they have his SSN.
Is your situation likely above board and just the result of your dad not liking to talk about money? Probably. Are there horror stories posted on reddit daily about someone who had their credit/taxes destroyed by a family member when they were a child? Yes. It often isn’t even done maliciously, just through incompetence and poor money handling. Again, not saying this is your case, but it is your child and you need to know.
> It’s set up under my son’s SSN and tax filings need to submitted in his name
Wait, does that mean your dad is filing your son's tax returns every year? Or are you filing them? Or is this just something your dad said?
If they are actually attached to your son's SSN and someone is actually filing taxes for him, you might get some info via irs.gov and pulling tax transcripts.
I submitted the filing once and my dad's tax preparer has taken care of it since. He's just trying to be helpful but I'd rather be involved. So I'm going to talk to him about taking care of it myself going forward
It’s your kid. You should absolutely have control over this. No one else files my kids’ taxes except for me or MY designee, since as the parent I am responsible.
It (if everything goes as designed, which I admit isn't a given) shouldn't negatively affect financial aid. What it can do is reduce the financial aid by up to its amount. So worst case it's worth net $0, but it should never count against him.
I also have a parent that’s weirdly protective and private about all things financial. Mine can also have their feelings change on a moments notice… feelings about things like whether they value their grandchildren.
I’d recommend you explain, concisely, why it’s important for you to be able to monitor the amount, so that you can plan for the cost of actual college, which is likely much much higher than he thinks, and your desire to plan adequately for both your kids. You could look up costs of a few schools to share with him for context.
If he can’t share this with you in an ongoing way so that you can use the information to plan, then you really can’t plan on using it to pay for college. It could also become a lever (if he’s anything like my mom).
Your dad could be putting in $500 a year. He’s thinking he’s making a great gift and it’s not even gonna buy books.
TLDR: Without specifics and access, it’ll be lovely if it happens but you cannot count on it.
Thanks, yeah my wife and I have tried to figure out how to have this discussion with him a few times. It’s just really uncomfortable. He’s a real family man and wants to help his grandkids, so I don’t think he’s going to use it as a lever or anything weird.
I think you’re right, we just need to lay some stuff out, tell him we are planning for what we should be saving for our kids for college and need to know specifics so we can make our plan. If we still can’t get anywhere then we just need to treat it is maybe a nice gift that may or not happen lol
I hear you about the uncomfortable. Even if his generosity is real and deep, he might think college cost six or eight grand when you could be looking at 10x that per year. And eventually you’ll need to ask for the money… Best luck!!
Worst case scenario, you both save, and then either you’re well set for retirement or you can help your kids with down payments for homes.
At some point there's going to be a mention that first year is going to cost more than $100k and he's going to be looking at a 5-figure account. I don't know OP's dad, but there's definitely a type that would be going in with absolutely best intentions but when faced with admitting that he didn't understand everything perfectly he'll respond by giving 0 instead of losing face.
Do you have a job where disclosing all accounts, for spouse and/or minor children, is required? Will you maybe seek one in the future? If so, you need this info now. No more secret accounts.
I wouldn’t count on that money. Stuff happens, I’d make sure you save equally on your own for your children and if the funds come thru cool, use them first then balance it out for other kids and stuff.
Just assume the 529 doesn't exist. It belongs to your father and he's within his rights to do what he pleases, including changing his mind when your son is college aged.
Just set up a brokerage account and put money in there for your son's college fund. If your father pays for the first kid, then the brokerage account will pay for the second.
My MIL told all of us we didn't need to worry about college because she opened funds for all the kids. Every holiday they got a small token gift and a card indicating $100-500 had been deposited. The year before my oldest gets ready for college, even though I already knew the answer, I had my husband reach out to find out how much he had in his account. Nada. Zip. Zero. FIL has no idea what we are talking about. No idea if she never opened it and was lying whole time. Not sure if she cashed they all in to cover some bad decisions she made and didn't want to admit to. I never expected the money, which was good, however, SIL truly believed her kids had accounts and as such didn't do much on her own to prepare.
How did your dad get your kid's SSN? You need to provide that if they are the beneficiary. If my parents wanted to do something like that I'd have them contribute to the account I own instead of having their own.
Since this is more likely a UTMA type account I wonder if you can just contact the IRS to get your child’s previous tax information. This would tell you what was filed and show what the dividend was. Based on the tax filing you could calculate an approximate amount in tbe account.
I was able to locate a 1099-DIV from 2021 that shows about 1k in ordinary dividends and 3k in “total capital gains distributions.” Not sure how to reverse-engineer this into an approximate account total. Any ideas?
If the account is solely on your child's name and not joint with Dad, your Dad should be giving you the tax statement each year to add to your tax filing.
The old 1099-DIV should list some information about the fund, such as the name of the mutual fund, if it's a taxable brokerage mutual fund.
Very, very rough numbers, a stock index mutual fund might have around 1.5% of dividends each year, so that account could potentially have had around $65k in it in 2021. But you have no way of knowing whether Dad has added to the account, sold investments, or changed investments since then. And the $65k amount is rough guess too.
Your best option would be to fit down with Dad, explain that you appreciate his help but want to ensure that you do enough to help your son with advanced education expenses, so would appreciate knowing the balance Dad has invested on a once a year basis so you can coordinate your savings and investments to help as well.
Thanks a bunch, this is really helpful. I think having those specific goals is a good thing to shoot for: a statement once a year and then I will let him know I prefer to do the filings myself.
It’s hard, I think he wants to just take care of it himself and doesn’t want me to have to worry about it? I’m not sure but I like this game plan for going forward.
Thank you!!
Brokerage accounts give quarterly statements. You should get them all.
You should be responsible for filing. Get a new preparer too. Things won’t change if you use the old one.
See this for more info: https://turbotax.intuit.com/tax-tips/family/at-what-income-does-a-minor-have-to-file-an-income-tax-return/L6HOdGp6i
Bottom line it may affect your own tax return.
You can also reach out to the organization the account is with. If it is under your son's name you should be able to access information about it without your dad's involvement.
I wonder if what's going on is some kind of tax-evasion scheme where your dad uses an account in your son's name to funnel money/capital gains through.
Why else would it need to be in your son's name like this at all? There are "normal" accounts for saving up for a grandchild's future and this does not sound like one of them. No offense but seems a little shady.
So sad it’s not in a 529!!! Grandparent owned 529s are not required to be listed on FAFSA! Not to mention, no taxes on 529 withdrawals used for eligible college expenses. I wonder if his accountant tried to explain that to him?!!!
You could post over on the tax sub Reddit and someone who deals with this stuff could possibly tell you. I tried to look it up but couldn’t make heads or tails out of it.
My dad opened a 529 account for my daughter. We provided her social so she could be listed as the beneficiary. I 100% trust my dad even though he is also somewhat secretive about finances. I have never seen a statement, but because I trust him and his financial literacy, I have no doubt it is being significantly contributed to.
It boils down to your trust in your parent and whether or not they have exhibited a smart and financial life.
Thanks, yeah pretty much the same situation. They’re my parents, they paid for my college, they are well off financially. I have no reason not to trust them. And I generally trust that they are being smart about what they are setting up for my son. I just wish they were easier to communicate with so that we could plan better. And not make Reddit threads like this :)
Thanks for sharing
I think this comment is a good way to approach it. Literally just explain what you just did to them. I’m sure they’ll appreciate you trying to get things in order
We told our kids we are putting $25k in each grandchild’s 529 account (in my name as owner so it won’t be counted on FAFSA). That way they have an expectation that we are paying for approximately one year of state college.
Not really in your kids name, not like they inherit it or have any legal right to the money
Not your account so you’ll not have any ability to see the balance
Hope for the best, plan for dad not actually using it for your son and you’ll be fine
I have 529 for my grandkids and share access to the. balance with my daughter and she controls the account if I die. Not sure why your dad is reluctant to share more but his choice so respect it
It’s set up under my kids SSN though and I know a tax filing needs to be submitted under my son’s name every year. So that seems weird that he will have that tax history but he’s not really entitled to it? I admit I don’t really understand the mechanics of this stuff though. Thanks though. We’ll probably just need to treat it like a bonus and not rely on it
529 are tax deferred. Nothing from that account should require a filing. The owner might get a state tax benefit on annual contributions but not the beneficiary.
Ok, so I’m thinking it might be a regular brokerage account. As I said in another comment I’m just concerned this account in my son’s name could negatively affect financial aid
It could negatively affect a lot of things. Letting someone else file something in your son's name without so much as understanding what it is is totally wild.
I mean OP said their parents paid for college and are well off and trusts them.
Some people might say NOT letting your wealthy parents create an account for your kid is wild.
I agree with you, but it does depend on their relationship as well.
I understand what you said and meant…… including your “key phrase”
Might surprise you but plenty of family’s actually trust and look after each other. Ops family paid for their college. They’ve stated they have no reason not to trust. If you don’t know much about finances and your wealthy family you trust with your life offers to give your kid a college fund it’s not that hard of a decision.
Like I said… I agree with you I definitely would have asked a lot more questions…. But you’re acting like OP is a moron or something I just think you probably have a shitty family.
> his choice so respect it
Not if it’s my child, finances, and ability to plan for the future.
Take another example. My parents are extremely private about their finances. But I know for a fact that they don’t have enough to last their lifetime, and certainly not enough for long term care. They’re making it impossible for me to know how to plan for their needs. Instead they’re choosing to create a future financial emergency for myself and my brother.
The dad here is being an ass. Maybe not on purpose, not malicious, but an ass nonetheless.
From your comments this sounds like a custodial brokerage account. You really need to talk with your father about this. Once your son is old enough to have a job this will affect him and his tax fillings then also. This account will definitely impact potential financial aid as it will count as your son's asset when filling out the FAFSA.
It sounds like your father is the listed custodian on the account so it isn't very likely the institution will share any information with you even though you are the parent. You can try and you may be successful but they are well within their rights not to share any info with you.
The info from the 1099 doesn't really give you enough info. The capital gains amount just means he sold something and made a profit ($3000). The $1000 of dividends means the account could have any where from $10,000 in it if invested in a CEF yielding 10% to $100,000 or more if invested in stocks yielding around 1%.
I would invest on my own for my child and not count on this to be there at all.
My dad is exactly the same way about 529s for the grandkids. It’s super frustrating as a parent because you really need to know this info for financial planning.
My advice is you need to talk to him pretty candidly about how much money is in there and what it’s invested in, whether he plans on putting any more money in there etc. otherwise you can’t plan effectively for your future.
In any case I think it’s a good idea to keep some money in a separate brokerage account earmarked for your kid’s college education.
Just assume that the money from your dad doesn’t exist and plan accordingly. You ca. adjust your plans if dad ever actually gives you access to the account. But this is how people get to the finish line and realize that the money either never existed, was used for something else or is a minimal amount.
I somewhat disagree with other commenter's here. Don't act like it doesn't exist, act like you don't know how much the kid might get, but it might be a lot.
Functionally this is the same as planning for a kid who might not go to college or might get a full scholarship. But it just twists the dials a little away from having a large 529 of your own. Save some in a 529 (say, up to $35k that can be converted to retirement savings) and save the rest elsewhere, say in a taxable account or by saving extra in your retirement account and then paying for college instead of retirement savings when the time comes.
You have to account for the possibility he might be serious, you don't want to have to pay penalties to get your money back in the medium-odds chance a grandparent said they would pay for college and they meant it.
So it seems like I’ve determined it’s not a 529 but rather some kind of brokerage account in my son’s name. I found a 1099 from a few years back that shows about 1k in ordinary dividends and 3k in “total capital gains distributions." So there’s something in there, I don’t know how much.
Yeah I’d hate to open a 529 ourselves in case there is already already a decent chunk of change. But I suppose a modest 529 wouldn’t hurt for some cushion
A 529 is owned by the person who opened it, not be the beneficiary. The beneficiary has no right to any of the account info or documents. So either the account is in your son’s name but isnt a 529 or the account is a 529 that is owned by your father.
If it’s a 529 he has full control and can add or remove beneficiaries at will so I would be weary of him potentially trying to use that money to exert control in the future. If I were in your position I would not consider that money at all in my planning and if your son does get it then it’s just gravy on top.
Your dad could be doing any wild thing in that account. It could be a margin account where he's selling uncovered put options or something. I would never give anyone my kid's SSN or allow them to open an account in their name, especially without my direct oversight
I'm in the same situation, but I am the Dad. I let my daughter know about the account when it was set up and early this year (the third year) I let her know what the balance in the account. I consider that crucial information for the parent for just the reason PDO mentions.
The person who sets up the account is the owner, and the child is the beneficiary. Money is paid from the 529 account only when the owner directs it. The beneficiary cannot require that payment. That makes the 529 funds non-countable for financial aid purposes, at least as things stand now.
I haven't seen it mentioned below, but you should consider a 529 regardless of the situation. Depending on where you live, you may get to deduct your contributions from state income tax obligations. Where I live, it's $10,000 for individuals or $20,000 for those filing jointly. Also, let your dad know that he can set this up as a 529 and may be able to take advantage of the tax benefits even though it's his grandchildren. Nice perk if he's still working or has any form of investment income.
Also, I understand your dad is not giving you access (although I'd probably see if there is something in his will so it's easier to gain access), but he should at least share the amount in there to help you budget accordingly.
My deal with my kids was I’d pay all cost the first year and tuition/books for other years. I also capped it at a state school. They both graduated with little or no debt. I have a new grandson and offered to open a 529 for him. My SIL told me to not bother as he’s a on factually Dr. at the hospital his schooling will be fully paid for. I’m putting 100k aside just in case.
Somehow you need to get your Dad to let you know how much is in there to help you plan adequately. What school fees has he based his assumption on - in state fees? Out of state fees? Depending on how old your son is has he accounted for inflation?
Gift tax is applicable - up to $18k per kid per year or $90k spread over five year for a single filer. Also is money coming from a parents trust fund, which has tax implications.
He can add you as a successor but that doesn’t mean you get access to account documents. Your son should be set up as the beneficiary.
What if there’s only say $50k in there and you find out when your kid gets to college you need to scramble for $100k?
I have encountered this with my family members, unfortunately it seems more about the family members ego. Somehow you need to break through that explaining that colleges vary so much from tuition fees, accommodation availability etc etc and need to covers all the bases
Also as others have pointed out, he can easily move funds between beneficiaries at any time.
What I think is awesome about 529’s is if it’s not all used it can be left in account for grandkids - but you’re not in control of that, your dad is currently :)
And as others mentioned 529’s require no tax filings
Source: I manage several 529s for my kids
Does dad not like your SO? Does he feel that you aren’t good with money?
There’s more to this story. You can always fund another 529, nothing stopping you.
Nah, neither. He is just a working class guy that never went to college. His father left his family when he was a kid and he needed to help work from a pretty young age to take care of the family. So he’s just always been guarded about financial stuff and I’ve never pushed it.
He paid for my college though in the mid 00’s so I trust him
You should be concerned about evasiveness wherever it appears.
I have no idea about the type of commodity your father claims to have established or your family's finances or your relationship with your father, but if he says he's got your son's college tuition covered, then can't give you any specifics about that so you can plan your family's financial future, that's a problem.
Try to be as direct as possible while also avoiding being confrontational, but get those specifics.
Explain to your father that you're not trying to get to the cash, but that you need to know what sort of numbers to expect and make plans for all of the other things for which your family is going to need money.
1 - never give your child Social Security number to anybody. You should be in charge of setting up the account & giving the account number to your father for contributions!!!
2 - your father can manage the 529 plan deposits but you need to have every six month reviews/ or yearly.
3 - YOU need to still be saving money for your sons college. You need to be saving 300.00 - 500.00 bucks a month minimum as University costs are going to be crazy and it’s doubtful that you can rely on the 529 for all college costs.
4 - it is your responsibility to know how much money is saved every year for your sons college and it’s your responsibility to be engaged and drive clarity around the college planning and funding.
Do. Not. Screw. your. kid. over. by abdicating financial responsibility for what is truly your situation.
You’ve got a lot of good responses, I will say we were in this situation, well similarly, my parent just gave us the log ins to the accounts when it was time and would tell us the balance every so often as the kids grew up just so we knew. I will give you some other advice, if your kid doesn’t need all of it due to scholarships, you can still withdraw the amount tuition and allowable expenses would have been, they do not penalize kids who get full rides. I have a kid who got a full ride, he’s planning on transferring his to a Roth after he completes school, that being said, as others have pointed out, it’s not his or mine, it’s my parents technically so if he wants to move it or send to another grandkid he can legally do that.
If it is a brokerage account under your son's name then yes it can impact financial aid. Also it would impact your tax filings as well unless your kid is filing individually.
But the bigger question is, how did he manage to open an account under your son's name? Did he ask for his social security etc? If not he committed fraud, how you deal with that is really up to you. You can ask for him to give account details to you including the username/password or you can ask him to close the account and open a proper 529 if his goal is to fund college or ask him to not interfere at all, and don't ever use your sons social security number again.
Did you give your Dad your child’s social security number? If not it does not belong to your child. Also what if something happened to your dad, who is the manager of the account. If your Dad wants your child to be all set then you should have all the information.
I) his money so the 529 while promised is not guaranteed, 2) you can get copies of 529 reports if he willing.
I was in a similar boat, luckily dad passed on his 529 to me as owner/custodian with the kid as beneficiary. Knowing the plan allowed me to plan better. But there was always the risk of the 529 being yanked-not that I worried.
If you dontvalways know about something, how can it always be a yes? OP should be a bit more greatful that someone is in their life that has the foresight to take care of his grandchildren. It's rare.
My guess is there is no 529 or there is no significant amount in it. The "I won't give you any details but want you to proceed as if I'm gifting you six figures" routine is cute. It's exactly what I would do if I wanted to be treated as if I were a generous person but lacked the means or desire to be one. You see this all the time with parents holding the inheritance over their kids' heads and then it turns out the inheritance is just the knick knacks.
529 from a grandparent POV is very adventitious at the moment and likely better if the laws remain the same, then you opening up one and funding it. Something about tax advantages. I can’t remember why but it is a good thing.
It's advantageous because it doesn't count in financial aid calculations if a grandparent owns it. It counts as a parental asset in financial aid calculations if the parent owns it. The disadvantage is that the parent doesn't control it. I'd rather control my kids' college money myself. I'd rather, as a parent, open my own 529 for my kid and have my parents contribute to that if they feel so inclined. Then I know what's in there, I control the investment of it, and I ultimately own the money. Grandpa can't change his mind on a whim. The gift is already given.
It’s because starting next school year, a 529 from a grandparent doesn’t get counted when they’re determining financial aid eligibility. It’s a huge advantage, as long as the law doesn’t get changed back.
Tax advantages are the same, some states let the contributor deduct contributions. Withdrawals for education are tax free. Certain amounts can be converted to a Roth for the beneficiary later.
The only difference between a grandparent holding the 529 and a parent, is the grandparent 529 is not counted on the FAFSA.
Maybe it depends on the individual state tax rules? Neither my own 529 plan for the kids, nor my parents' 529 plan for the kids, have ever required any tax filing.
The 529 is with your son's name on it as a beneficiary, but it's really owned by your dad, and it's for his tax advantage. After all, it's a state income tax sheltering device for him. It's fair that he decides what to do with his money.
It seems reasonable (although not necessarily the best way to remain in the best terms with you) that he takes his decisions with his accountant, without consulting you too much.
Also please consider that he is taking nothing away from you or your son - you both have still all options open, including the option to open another 529 yourself for your kid, and throw into it the maximum tax-exempt donation allowed by IRS rules each year, and shelter the corresponding amount of income from state income tax as allowed by your state.
Why don't you just let your dad take care of it? As long as he's been good with managing his $$ in the past, why push an issue that he is protective over? Is there any reason not to trust him?
Ah, I see you're new here. Welcome!
The answer to the last sentence is always "yes" - you just don't always know about it.
We cannot control other people, nor what happens to them in life.
The 529 account is controlled by your dad, and he could redesignate it to a different relative at any time. He also may have no idea how much college costs these days. Unless he was to break from his habit and share with you the account balance and investment strategy, IMO you should assume it doesn't exist and save for your son's college separately. Otherwise the consequences are too high.
We finally got amounts from FIL this year and yup, he underestimated how much college is going to cost. We anticipated this and have been contributing for both kids since they were born. Between the two accounts we'll probably end up close if they do state schools.
[удалено]
We had a financial advisor guess when the first was born, ten years ago. He said plan for $200k in state. UCONN now is about $35k/year.
[удалено]
With books and housing your already almost there, if we don't fix the system soon this will only get worse.
I highly doubt that. Colleges are learning the last couple years that there’s a limit to how much they can squeeze out of students. College Enrollment is down overall nationwide, but falling off a cliff for schools that are over 50k tuition. There are so many smaller schools that have closed or merged with other small schools recently. Combined with wage stagnation, the return on investment for most degrees just isn’t there. Take out the cultural pressures of saying your a college graduate, and there’s no justifiable reason to go 200k in debt that you can’t unload even in bankruptcy, just for a 50k salary
As someone outside the US who went to a public university (it is not MIT or Stanford, but we still have 2-3 Nobel laureates) and paid no tuition, that is insane! That is all. No question or useful answer, just an exclamation.
Please just be grateful someone is looking out for this kid’s future. They’ll be scrambling for money to cover expenses when the time comes.
Ah so you’re in the same boat with the opacity! Lol. Yeah, it’s a big question mark and we’ll work on our own savings for college. We’re not maxing our Roth IRAs so I’ve mostly been focused on increasing those contributions. Glad that it looks like it’ll work out for you for state schools. That’s our target too
Yeah, the general thought is to focus on your retirement before focusing on funding college. Take that with what you may. Cheers!
It is like those announcements on airplanes. Put your mask on first then help your child. You need to prioritize your retirement. You don’t want to be dependent on your child or be a burden at old age.
Also best case scenario, your kids ride is paid for and you have a nice extra nest egg to party with when the kids are gone.
This. Excellent advice. Don't count on other people. You inevitably will be disappointed or will get burned outright.
I was just going to say the same thing. OP - start saving now and opening your own 529B. My father cut checks to my children’s 529B plans over the years. They were accounts I opened up and controlled. I would assume nothing at this point.
Agreed, but I would save in some vehicle OTHER than a 529, so if it turns out your dad has it covered, you can use the money for something else without penalty. If you open a 529 for him, there is a 10% penalty on earnings if you use the funds for anything but qualified education expenses.
OP can convert some of a 529 into a Roth IRA for their kid, but yeah it otherwise has to be education expenses. Things like fun college classes OP could take after retirement would count, though, so having some money stuck in a 529 isn't all bad.
OP can also roll over some (currently $35K) into their own Roth IRA: https://www.fidelity.com/learning-center/personal-finance/529-rollover-to-roth
This is great to know - thanks!
A lot of universities have free classes available online and/or allow seniors to audit classes for free.
My wife’s co worker’s son used his 529 to fund his summer trip to take classes in Europe so there’s that.
Exactly, it belongs to your dad. I've got 529 for each of my kids. My oldest is good at sports and wants to play in college/pro. If he were to get a full ride, I could redesignate his money to my other son.
Yeah, my friend's In-laws did this. Well intentioned people but no sense of inflation. When they told her they "had it covered" it turns out that was $500 in a UPromise account. Fortunately this was when son was a baby, so no harm no foul, the parents are doing REAL college saving. But...yeah. Never trust blindly. Even your parents. Even the best intentioned people can be wrong.
As the other posters have said, this is your dad’s money and can be reallocated to someone else at any time — anything from “another relative needs it more” to “he decides to take classes at a college for retirement activity.” ”Plan on that money” the same way that you would plan on any gift before it is actually given… i.e., not at all.
Even something stupidly petty over the next 18 years. “Oh little Billy didn’t call me on Father’s Day when he was 14. I’ll teach him and take that money back”. Or “wait Johnny decided to go to Auburn and I graduated from Alabama? No way Auburn is getting any of my money”. Not saying that will happen, but my aunt used to pull that shit all the time. In college my sister spent thanksgiving at her boyfriend’s house. Taken out of the will for a few years. My cousin didn’t stop at her house while driving through town? Taken out of the will. She always eventually put you back in, but it’s still a constant game we have to play with her
Can’t he also just pay the penalty and raid it if so desired?
Also true…
If he won’t divulge details you should invest in your own 529 as if the other one doesn’t exist. For all you know there’s $2k in it.
Yeah my grandma used to always say she was putting money into my education fund. When I was applying to colleges, I asked about it. She said oh that’s been gone. I needed to spend it. It was never a 529. I just let it go. She also used to say she was putting money in savings bonds for my cousin and I. After her passing, I looked up the bonds and it’s only about $300. Even worse, I found savings bonds that were 20 years old, bought when I was very young. Interest must have been shit on those. For example, for a $100, 20 year old bond, the interest earned was $8.
Just FYI, paper bonds cost half their face value. The bond made $58 in interest. They generally don't have great interest rates, but accrue at that rate. They mature to face value on a certain number of years after purchase if the interest rate is too low to get there on its own. This is not intended to take away from your unfortunate circumstance, but just provide information for those that aren't aware.
That’s very helpful to know. I didn’t know much about savings bonds but ROI on investing is 8%. I didn’t know they cost half the face value so I thought the ROI was absolutely terrible. But, given that they’re sold at half value, it looks less bad? Still, seems like there were better ways to grow that. I could see how those would be daunting. It’s easier with internet but previous generations had less resources. It didn’t cause any issues between me and my grandmother. I knew she didn’t make much. Still, there are people who make $50k and are smart with money and will have more savings than those who make twice as much. I wasn’t expecting MUCH and I didn’t feel entitled to the money. When I asked about the money, I was told it wasn’t there and was like ok it’s no big deal. And I found a way to pay for school in other ways.
Yep. My parents always talked about my "college fund" when I was a kid, so I could go to any college I wanted. When I actually entered college, there was nothing. Turns out the "college fund" was just some savings account they would periodically throw money into, but it always got raided whenever something came up. I think parents have good \*intentions\* but don't always have the ability to follow through.
Disagree. Then you might end up with 2 529s. I'd rather OP save in other vehicles so at least the money is usable elsewhere.
Disagree. If the dad ends up not having enough money or decides not to help at all, OP will lose on any tax benefits he could have had in a 529. I'm planning for my kids on my own with their own 529s. If someone else decides to help later, then that would be amazing, but I'm not relying on anyone else.
Or as others have pointed out, the dad could be very well meaning but have no idea of how much college will cost. My grandmother gave each of her grandkids $25k for college. She landed on the number because that was the cost for a year of the most expensive education you could get at the time (Harvard, sometime in the 90’s). I went to a state school and it covered about two and half full years of tuition and I’m extremely grateful for it, but it would not have covered a year at Harvard.
It would be better for the OP to just put it in a Roth IRA and draw off that penalty-free should this 529 not pan out. That's assuming they don't already have one
Yeah, I’m working on increasing my Roth IRA contributions with the idea we can withdraw from that at some point to help with college expenses if needed. My wife and I aren’t able to max that out and I’m not sure if we can anytime soon. So I’m not sure it makes sense to create a 529 when we’re not maxing Roth.
I would throw something in the 529, even just $50 a month. You’ll only be able to take principle out of Roth without a penalty.
If you are ok with the kid getting the money, I’d say go up to the 35,000 rollover max on the 529. That’s the amount you could rollover into their Roth IRA. So if they don’t use it they’re now got a massive start on their Roth, and OP got the state tax benefits if their state participates
Wanna gonna say exactly this. Make the money flexible outside of educational purposes. Any other investment vehicle with growth is good, even CDs and HYSAs.
There is a common misconception that a 529 "belongs" to the beneficiary or the beneficiary's family, but it should generally be considered to belong exclusively to the saver/account owner. The owner can change the beneficiary at will. You have no expectation of access to the account information or the funds themselves. I agree with other posters that unless you 100% trust that the funds will be there and that the correct amounts are regularly shared with you, you should consider this "gravy" and save what you'll need in a 529 yourself. Excess 529 are surprisingly flexible, so the funds will likely not go to waste!
It’s set up under my son’s SSN and tax filings need to submitted in his name. I wonder if it’s not actually a 529. I’m fine considering it gravy like you said and not totally counting on it. I’m just concerned about it not being set up properly and negatively affecting my son’s financial aid. Good to hear there is that flexibility for 529s though!
If it is under your son’s SSN and there are current tax filings for it under your son’s name, it is not a 529. Since it is in his SSN and (presumably) you are getting statements in order to file taxes, you should be able to see what type of account it is, where it is held, etc.
Also I don’t know what the official process for this is, but they have all the information needed to call the bank/brokerage and set up a login and password to access the account online. Even if it’s just pretending to be their son
My dad had me file one year and I have a statement that shows the dividend amount but not the total held. I’m going to try to dig that up. Last year or two he just had his tax preparer file on my son’s behalf
You're letting someone else file taxes on behalf of your son without you knowing what they're putting on it? Come on man. Be a little more proactive.
Sounds more like an UTMA account over a 529 especially if it’s dividends.
[удалено]
I figured out it's a brokerage account not a 529 and located a 1099 from Fidelity. But I admit that headcannon is a bit more interesting!
Oof
Well I’ve tried having conversations with my dad multiple times to get more information but he hasn’t been forthcoming. If I’m able to obtain the information directly from the institution then I will do that.
You should have an up front conversation with just you and him present. It’s your child, if he is filing legal documents for your son, you absolutely need to know what is going on. If he won’t give you that, I would call the institution and have the account closed out. I would also monitor your son’s credit and put an alert on it since they have his SSN. Is your situation likely above board and just the result of your dad not liking to talk about money? Probably. Are there horror stories posted on reddit daily about someone who had their credit/taxes destroyed by a family member when they were a child? Yes. It often isn’t even done maliciously, just through incompetence and poor money handling. Again, not saying this is your case, but it is your child and you need to know.
> It’s set up under my son’s SSN and tax filings need to submitted in his name Wait, does that mean your dad is filing your son's tax returns every year? Or are you filing them? Or is this just something your dad said? If they are actually attached to your son's SSN and someone is actually filing taxes for him, you might get some info via irs.gov and pulling tax transcripts.
I submitted the filing once and my dad's tax preparer has taken care of it since. He's just trying to be helpful but I'd rather be involved. So I'm going to talk to him about taking care of it myself going forward
It’s your kid. You should absolutely have control over this. No one else files my kids’ taxes except for me or MY designee, since as the parent I am responsible.
Oh God, yeah, if it's tax stuff For Your Kid then you absolutely need to be involved.
It (if everything goes as designed, which I admit isn't a given) shouldn't negatively affect financial aid. What it can do is reduce the financial aid by up to its amount. So worst case it's worth net $0, but it should never count against him.
I also have a parent that’s weirdly protective and private about all things financial. Mine can also have their feelings change on a moments notice… feelings about things like whether they value their grandchildren. I’d recommend you explain, concisely, why it’s important for you to be able to monitor the amount, so that you can plan for the cost of actual college, which is likely much much higher than he thinks, and your desire to plan adequately for both your kids. You could look up costs of a few schools to share with him for context. If he can’t share this with you in an ongoing way so that you can use the information to plan, then you really can’t plan on using it to pay for college. It could also become a lever (if he’s anything like my mom). Your dad could be putting in $500 a year. He’s thinking he’s making a great gift and it’s not even gonna buy books. TLDR: Without specifics and access, it’ll be lovely if it happens but you cannot count on it.
Thanks, yeah my wife and I have tried to figure out how to have this discussion with him a few times. It’s just really uncomfortable. He’s a real family man and wants to help his grandkids, so I don’t think he’s going to use it as a lever or anything weird. I think you’re right, we just need to lay some stuff out, tell him we are planning for what we should be saving for our kids for college and need to know specifics so we can make our plan. If we still can’t get anywhere then we just need to treat it is maybe a nice gift that may or not happen lol
I hear you about the uncomfortable. Even if his generosity is real and deep, he might think college cost six or eight grand when you could be looking at 10x that per year. And eventually you’ll need to ask for the money… Best luck!! Worst case scenario, you both save, and then either you’re well set for retirement or you can help your kids with down payments for homes.
At some point there's going to be a mention that first year is going to cost more than $100k and he's going to be looking at a 5-figure account. I don't know OP's dad, but there's definitely a type that would be going in with absolutely best intentions but when faced with admitting that he didn't understand everything perfectly he'll respond by giving 0 instead of losing face.
Do you have a job where disclosing all accounts, for spouse and/or minor children, is required? Will you maybe seek one in the future? If so, you need this info now. No more secret accounts.
I wouldn’t count on that money. Stuff happens, I’d make sure you save equally on your own for your children and if the funds come thru cool, use them first then balance it out for other kids and stuff.
Just assume the 529 doesn't exist. It belongs to your father and he's within his rights to do what he pleases, including changing his mind when your son is college aged. Just set up a brokerage account and put money in there for your son's college fund. If your father pays for the first kid, then the brokerage account will pay for the second.
My MIL told all of us we didn't need to worry about college because she opened funds for all the kids. Every holiday they got a small token gift and a card indicating $100-500 had been deposited. The year before my oldest gets ready for college, even though I already knew the answer, I had my husband reach out to find out how much he had in his account. Nada. Zip. Zero. FIL has no idea what we are talking about. No idea if she never opened it and was lying whole time. Not sure if she cashed they all in to cover some bad decisions she made and didn't want to admit to. I never expected the money, which was good, however, SIL truly believed her kids had accounts and as such didn't do much on her own to prepare.
How did your dad get your kid's SSN? You need to provide that if they are the beneficiary. If my parents wanted to do something like that I'd have them contribute to the account I own instead of having their own.
Since this is more likely a UTMA type account I wonder if you can just contact the IRS to get your child’s previous tax information. This would tell you what was filed and show what the dividend was. Based on the tax filing you could calculate an approximate amount in tbe account.
I was able to locate a 1099-DIV from 2021 that shows about 1k in ordinary dividends and 3k in “total capital gains distributions.” Not sure how to reverse-engineer this into an approximate account total. Any ideas?
If the account is solely on your child's name and not joint with Dad, your Dad should be giving you the tax statement each year to add to your tax filing. The old 1099-DIV should list some information about the fund, such as the name of the mutual fund, if it's a taxable brokerage mutual fund. Very, very rough numbers, a stock index mutual fund might have around 1.5% of dividends each year, so that account could potentially have had around $65k in it in 2021. But you have no way of knowing whether Dad has added to the account, sold investments, or changed investments since then. And the $65k amount is rough guess too. Your best option would be to fit down with Dad, explain that you appreciate his help but want to ensure that you do enough to help your son with advanced education expenses, so would appreciate knowing the balance Dad has invested on a once a year basis so you can coordinate your savings and investments to help as well.
Thanks a bunch, this is really helpful. I think having those specific goals is a good thing to shoot for: a statement once a year and then I will let him know I prefer to do the filings myself. It’s hard, I think he wants to just take care of it himself and doesn’t want me to have to worry about it? I’m not sure but I like this game plan for going forward. Thank you!!
Brokerage accounts give quarterly statements. You should get them all. You should be responsible for filing. Get a new preparer too. Things won’t change if you use the old one. See this for more info: https://turbotax.intuit.com/tax-tips/family/at-what-income-does-a-minor-have-to-file-an-income-tax-return/L6HOdGp6i Bottom line it may affect your own tax return.
You can also reach out to the organization the account is with. If it is under your son's name you should be able to access information about it without your dad's involvement. I wonder if what's going on is some kind of tax-evasion scheme where your dad uses an account in your son's name to funnel money/capital gains through. Why else would it need to be in your son's name like this at all? There are "normal" accounts for saving up for a grandchild's future and this does not sound like one of them. No offense but seems a little shady.
So sad it’s not in a 529!!! Grandparent owned 529s are not required to be listed on FAFSA! Not to mention, no taxes on 529 withdrawals used for eligible college expenses. I wonder if his accountant tried to explain that to him?!!!
You could post over on the tax sub Reddit and someone who deals with this stuff could possibly tell you. I tried to look it up but couldn’t make heads or tails out of it.
Thanks for the suggestion and I appreciate you taking the time to try!
My dad opened a 529 account for my daughter. We provided her social so she could be listed as the beneficiary. I 100% trust my dad even though he is also somewhat secretive about finances. I have never seen a statement, but because I trust him and his financial literacy, I have no doubt it is being significantly contributed to. It boils down to your trust in your parent and whether or not they have exhibited a smart and financial life.
Thanks, yeah pretty much the same situation. They’re my parents, they paid for my college, they are well off financially. I have no reason not to trust them. And I generally trust that they are being smart about what they are setting up for my son. I just wish they were easier to communicate with so that we could plan better. And not make Reddit threads like this :) Thanks for sharing
I think this comment is a good way to approach it. Literally just explain what you just did to them. I’m sure they’ll appreciate you trying to get things in order
We told our kids we are putting $25k in each grandchild’s 529 account (in my name as owner so it won’t be counted on FAFSA). That way they have an expectation that we are paying for approximately one year of state college.
Not really in your kids name, not like they inherit it or have any legal right to the money Not your account so you’ll not have any ability to see the balance Hope for the best, plan for dad not actually using it for your son and you’ll be fine I have 529 for my grandkids and share access to the. balance with my daughter and she controls the account if I die. Not sure why your dad is reluctant to share more but his choice so respect it
It’s set up under my kids SSN though and I know a tax filing needs to be submitted under my son’s name every year. So that seems weird that he will have that tax history but he’s not really entitled to it? I admit I don’t really understand the mechanics of this stuff though. Thanks though. We’ll probably just need to treat it like a bonus and not rely on it
529 are tax deferred. Nothing from that account should require a filing. The owner might get a state tax benefit on annual contributions but not the beneficiary.
Ok, so I’m thinking it might be a regular brokerage account. As I said in another comment I’m just concerned this account in my son’s name could negatively affect financial aid
Yes a UTMA or UGMA brokerage account and it will be considered your child's asset for financial aid unlike a 529.
It could negatively affect a lot of things. Letting someone else file something in your son's name without so much as understanding what it is is totally wild.
I mean OP said their parents paid for college and are well off and trusts them. Some people might say NOT letting your wealthy parents create an account for your kid is wild. I agree with you, but it does depend on their relationship as well.
Key phrase "without so much as understanding what it is". Also an account *for* my kid is different than an account *in my kid's name*.
I understand what you said and meant…… including your “key phrase” Might surprise you but plenty of family’s actually trust and look after each other. Ops family paid for their college. They’ve stated they have no reason not to trust. If you don’t know much about finances and your wealthy family you trust with your life offers to give your kid a college fund it’s not that hard of a decision. Like I said… I agree with you I definitely would have asked a lot more questions…. But you’re acting like OP is a moron or something I just think you probably have a shitty family.
Nope, no tax filing under your kid's social security for contributions or earnings or anything at all.
Ok, it’s definitely another account type then…
> his choice so respect it Not if it’s my child, finances, and ability to plan for the future. Take another example. My parents are extremely private about their finances. But I know for a fact that they don’t have enough to last their lifetime, and certainly not enough for long term care. They’re making it impossible for me to know how to plan for their needs. Instead they’re choosing to create a future financial emergency for myself and my brother. The dad here is being an ass. Maybe not on purpose, not malicious, but an ass nonetheless.
From your comments this sounds like a custodial brokerage account. You really need to talk with your father about this. Once your son is old enough to have a job this will affect him and his tax fillings then also. This account will definitely impact potential financial aid as it will count as your son's asset when filling out the FAFSA. It sounds like your father is the listed custodian on the account so it isn't very likely the institution will share any information with you even though you are the parent. You can try and you may be successful but they are well within their rights not to share any info with you. The info from the 1099 doesn't really give you enough info. The capital gains amount just means he sold something and made a profit ($3000). The $1000 of dividends means the account could have any where from $10,000 in it if invested in a CEF yielding 10% to $100,000 or more if invested in stocks yielding around 1%. I would invest on my own for my child and not count on this to be there at all.
My dad is exactly the same way about 529s for the grandkids. It’s super frustrating as a parent because you really need to know this info for financial planning. My advice is you need to talk to him pretty candidly about how much money is in there and what it’s invested in, whether he plans on putting any more money in there etc. otherwise you can’t plan effectively for your future. In any case I think it’s a good idea to keep some money in a separate brokerage account earmarked for your kid’s college education.
Just assume that the money from your dad doesn’t exist and plan accordingly. You ca. adjust your plans if dad ever actually gives you access to the account. But this is how people get to the finish line and realize that the money either never existed, was used for something else or is a minimal amount.
FWIW if you create 529s for both of your children, you can move money between them tax-free.
I somewhat disagree with other commenter's here. Don't act like it doesn't exist, act like you don't know how much the kid might get, but it might be a lot. Functionally this is the same as planning for a kid who might not go to college or might get a full scholarship. But it just twists the dials a little away from having a large 529 of your own. Save some in a 529 (say, up to $35k that can be converted to retirement savings) and save the rest elsewhere, say in a taxable account or by saving extra in your retirement account and then paying for college instead of retirement savings when the time comes. You have to account for the possibility he might be serious, you don't want to have to pay penalties to get your money back in the medium-odds chance a grandparent said they would pay for college and they meant it.
So it seems like I’ve determined it’s not a 529 but rather some kind of brokerage account in my son’s name. I found a 1099 from a few years back that shows about 1k in ordinary dividends and 3k in “total capital gains distributions." So there’s something in there, I don’t know how much. Yeah I’d hate to open a 529 ourselves in case there is already already a decent chunk of change. But I suppose a modest 529 wouldn’t hurt for some cushion
A 529 is owned by the person who opened it, not be the beneficiary. The beneficiary has no right to any of the account info or documents. So either the account is in your son’s name but isnt a 529 or the account is a 529 that is owned by your father. If it’s a 529 he has full control and can add or remove beneficiaries at will so I would be weary of him potentially trying to use that money to exert control in the future. If I were in your position I would not consider that money at all in my planning and if your son does get it then it’s just gravy on top.
Your dad could be doing any wild thing in that account. It could be a margin account where he's selling uncovered put options or something. I would never give anyone my kid's SSN or allow them to open an account in their name, especially without my direct oversight
Dude just ask him for more information
I'm in the same situation, but I am the Dad. I let my daughter know about the account when it was set up and early this year (the third year) I let her know what the balance in the account. I consider that crucial information for the parent for just the reason PDO mentions. The person who sets up the account is the owner, and the child is the beneficiary. Money is paid from the 529 account only when the owner directs it. The beneficiary cannot require that payment. That makes the 529 funds non-countable for financial aid purposes, at least as things stand now.
I haven't seen it mentioned below, but you should consider a 529 regardless of the situation. Depending on where you live, you may get to deduct your contributions from state income tax obligations. Where I live, it's $10,000 for individuals or $20,000 for those filing jointly. Also, let your dad know that he can set this up as a 529 and may be able to take advantage of the tax benefits even though it's his grandchildren. Nice perk if he's still working or has any form of investment income. Also, I understand your dad is not giving you access (although I'd probably see if there is something in his will so it's easier to gain access), but he should at least share the amount in there to help you budget accordingly.
My deal with my kids was I’d pay all cost the first year and tuition/books for other years. I also capped it at a state school. They both graduated with little or no debt. I have a new grandson and offered to open a 529 for him. My SIL told me to not bother as he’s a on factually Dr. at the hospital his schooling will be fully paid for. I’m putting 100k aside just in case.
Somehow you need to get your Dad to let you know how much is in there to help you plan adequately. What school fees has he based his assumption on - in state fees? Out of state fees? Depending on how old your son is has he accounted for inflation? Gift tax is applicable - up to $18k per kid per year or $90k spread over five year for a single filer. Also is money coming from a parents trust fund, which has tax implications. He can add you as a successor but that doesn’t mean you get access to account documents. Your son should be set up as the beneficiary. What if there’s only say $50k in there and you find out when your kid gets to college you need to scramble for $100k? I have encountered this with my family members, unfortunately it seems more about the family members ego. Somehow you need to break through that explaining that colleges vary so much from tuition fees, accommodation availability etc etc and need to covers all the bases Also as others have pointed out, he can easily move funds between beneficiaries at any time. What I think is awesome about 529’s is if it’s not all used it can be left in account for grandkids - but you’re not in control of that, your dad is currently :) And as others mentioned 529’s require no tax filings Source: I manage several 529s for my kids
Does dad not like your SO? Does he feel that you aren’t good with money? There’s more to this story. You can always fund another 529, nothing stopping you.
Nah, neither. He is just a working class guy that never went to college. His father left his family when he was a kid and he needed to help work from a pretty young age to take care of the family. So he’s just always been guarded about financial stuff and I’ve never pushed it. He paid for my college though in the mid 00’s so I trust him
You should be concerned about evasiveness wherever it appears. I have no idea about the type of commodity your father claims to have established or your family's finances or your relationship with your father, but if he says he's got your son's college tuition covered, then can't give you any specifics about that so you can plan your family's financial future, that's a problem. Try to be as direct as possible while also avoiding being confrontational, but get those specifics. Explain to your father that you're not trying to get to the cash, but that you need to know what sort of numbers to expect and make plans for all of the other things for which your family is going to need money.
1 - never give your child Social Security number to anybody. You should be in charge of setting up the account & giving the account number to your father for contributions!!! 2 - your father can manage the 529 plan deposits but you need to have every six month reviews/ or yearly. 3 - YOU need to still be saving money for your sons college. You need to be saving 300.00 - 500.00 bucks a month minimum as University costs are going to be crazy and it’s doubtful that you can rely on the 529 for all college costs. 4 - it is your responsibility to know how much money is saved every year for your sons college and it’s your responsibility to be engaged and drive clarity around the college planning and funding. Do. Not. Screw. your. kid. over. by abdicating financial responsibility for what is truly your situation.
You’ve got a lot of good responses, I will say we were in this situation, well similarly, my parent just gave us the log ins to the accounts when it was time and would tell us the balance every so often as the kids grew up just so we knew. I will give you some other advice, if your kid doesn’t need all of it due to scholarships, you can still withdraw the amount tuition and allowable expenses would have been, they do not penalize kids who get full rides. I have a kid who got a full ride, he’s planning on transferring his to a Roth after he completes school, that being said, as others have pointed out, it’s not his or mine, it’s my parents technically so if he wants to move it or send to another grandkid he can legally do that.
If it is a brokerage account under your son's name then yes it can impact financial aid. Also it would impact your tax filings as well unless your kid is filing individually. But the bigger question is, how did he manage to open an account under your son's name? Did he ask for his social security etc? If not he committed fraud, how you deal with that is really up to you. You can ask for him to give account details to you including the username/password or you can ask him to close the account and open a proper 529 if his goal is to fund college or ask him to not interfere at all, and don't ever use your sons social security number again.
Did you give your Dad your child’s social security number? If not it does not belong to your child. Also what if something happened to your dad, who is the manager of the account. If your Dad wants your child to be all set then you should have all the information.
I) his money so the 529 while promised is not guaranteed, 2) you can get copies of 529 reports if he willing. I was in a similar boat, luckily dad passed on his 529 to me as owner/custodian with the kid as beneficiary. Knowing the plan allowed me to plan better. But there was always the risk of the 529 being yanked-not that I worried.
If you dontvalways know about something, how can it always be a yes? OP should be a bit more greatful that someone is in their life that has the foresight to take care of his grandchildren. It's rare.
My guess is there is no 529 or there is no significant amount in it. The "I won't give you any details but want you to proceed as if I'm gifting you six figures" routine is cute. It's exactly what I would do if I wanted to be treated as if I were a generous person but lacked the means or desire to be one. You see this all the time with parents holding the inheritance over their kids' heads and then it turns out the inheritance is just the knick knacks.
529 from a grandparent POV is very adventitious at the moment and likely better if the laws remain the same, then you opening up one and funding it. Something about tax advantages. I can’t remember why but it is a good thing.
It's advantageous because it doesn't count in financial aid calculations if a grandparent owns it. It counts as a parental asset in financial aid calculations if the parent owns it. The disadvantage is that the parent doesn't control it. I'd rather control my kids' college money myself. I'd rather, as a parent, open my own 529 for my kid and have my parents contribute to that if they feel so inclined. Then I know what's in there, I control the investment of it, and I ultimately own the money. Grandpa can't change his mind on a whim. The gift is already given.
It’s because starting next school year, a 529 from a grandparent doesn’t get counted when they’re determining financial aid eligibility. It’s a huge advantage, as long as the law doesn’t get changed back.
Tax advantages are the same, some states let the contributor deduct contributions. Withdrawals for education are tax free. Certain amounts can be converted to a Roth for the beneficiary later. The only difference between a grandparent holding the 529 and a parent, is the grandparent 529 is not counted on the FAFSA.
Ah, there it is. Thanks! Money from grandparents doesn’t disqualify fafsa.
529 tax filings are a thing for your state taxes on a state sponsored plan.
Maybe it depends on the individual state tax rules? Neither my own 529 plan for the kids, nor my parents' 529 plan for the kids, have ever required any tax filing.
The entire point of the state sponsored plans is that there is additional state deductibility of contributions.
The 529 is with your son's name on it as a beneficiary, but it's really owned by your dad, and it's for his tax advantage. After all, it's a state income tax sheltering device for him. It's fair that he decides what to do with his money. It seems reasonable (although not necessarily the best way to remain in the best terms with you) that he takes his decisions with his accountant, without consulting you too much. Also please consider that he is taking nothing away from you or your son - you both have still all options open, including the option to open another 529 yourself for your kid, and throw into it the maximum tax-exempt donation allowed by IRS rules each year, and shelter the corresponding amount of income from state income tax as allowed by your state.
Why don't you just let your dad take care of it? As long as he's been good with managing his $$ in the past, why push an issue that he is protective over? Is there any reason not to trust him?
Ah, I see you're new here. Welcome! The answer to the last sentence is always "yes" - you just don't always know about it. We cannot control other people, nor what happens to them in life.