Annoyed with Grandparents' Separate 529 for my Son

[ReadySetMillionaire]

In addition to all my separate frustrations in my other thread, my dad and his wife set up a 529 for my son without letting me know.  They asked for his SSN, and I assumed that it was for some life insurance beneficiary designation or something, so I did not ask.

Anyway, they are contributing $500 - $1,000 per year to this account.  I'm frustrated for a couple reasons because:

(a) Distributions from a 529 can eventually affect my son's eligibility for financial aid;

(b) My wife and I wanted to save a specific amount for school for our children, and their "black box" of saving is going to throw off that plan;

(c) My wife and I wanted our kids to have *some* loans, because we both believe student loans kicked both of our asses into good financial gear, even if the loans sucked; and

(d) It just makes things more inconvenient for me.  Now I'm always going to have to keep track of this and ask about it.

I approached my dad about rolling things over to the 529 account my wife and I set up, and he politely refused.  I asked why and he said "we just want to do our own thing for your son."  It just seems stupid and immature to me that they need a separate account and need to get their own credit.

It goes without saying that I'm appreciative, and I communicated that very clearly. Part of me also feels that my other frustrations with my parents is clouding my judgment here, and that I'm being a dickhead for not just appreciating their gesture and moving on with life.

But I'm annoyed and feel like I need to re-visit this again because my son is my son, and this is going to annoy me for almost 20 years.

Am I off base here?

[CNM]

Do you have multiple kids or just the one?  I wasn't sure if one concern was that the son would be getting extra funds from the grandparents while the others wouldn't.

Here's my take: let it go.  $500-$1000 a year over 16 years will very likely not cover a full 4 year degree so there were will be plenty of opportunities for loans and money management.  Even if your kid is able to pay for college without loans, financial literacy and fiscal responsibility is certainly possible without them.

[LWYRUP]

Personally I think you are off base.  I would just treat the account as if it doesn't exist and fund whatever you would fund anyways.  Then ask again about the account balance when your son is 17.  If you happened to oversave, that extra money can be used for graduate school, or you can roll it over and name a grandchild or niece or nephew or just use it for other things and pay a penalty.

If they are only funding 500-1,000 a year, trust me your kid will have some loans anyways whether you like it or not. 

It would be great if parents just did everything exactly like we told them but sometimes I think you need to appreciate the gesture and recognize you can't control everything. 

My parents are similarly frustrating (they've told me they have set aside funds for kids' college, but not how much or in what account, etc. so I am just pretending its idle chatter until I see written proof otherwise) but I've given up on the idea that I can just direct their actions so I just say thank you and live my life normally.  To be fair, I am not sure I'd want my kids dictating to me either.  It's a relationship, so you need some give and take. 

[ReadySetMillionaire]

Do you have multiple kids or just the one?  I wasn't sure if one concern was that the son would be getting extra funds from the grandparents while the others wouldn't.

Here's my take: let it go.  $500-$1000 a year over 16 years will very likely not cover a full 4 year degree so there were will be plenty of opportunities for loans and money management.  Even if your kid is able to pay for college without loans, financial literacy and fiscal responsibility is certainly possible without them.

We only have one kid.  Planning on a second hopefully soon.  As of right now, and assuming (God-willing) we are lucky enough to have a second kid, I don't plan on sharing his or her SSN with them.  This irrationally but really annoys me.

[charis]

You know it's irrational. I have the same irrational annoyances with my parents, so I absolutely get it. But don't resign yourself to 20 years of being annoyed. Put it out of your mind, it doesn't exist anymore.  It the account is still there in 17 years, so be it, you can deal with it then. A lot of life will happen in that time and you'll be looking at this differently.

[Laura33]

Let it go.  They want to do something nice for their grandchild.  And it is completely reasonable for them to do it in their name, in their own account, both to get any tax benefits your state offers and to maintain control of the money.  And you don't have to worry about distributions affecting financial aid if you save their distributions for senior year.

Besides, with your likely income/assets, your kid is not going to qualify for any financial aid anyway.  And given spiraling college costs, your kid is going to end up with loans unless you personally are saving ridiculous amounts.  As someone whose kid is a freshman now, let me just say:  I've heard a gazillion people say they're sorry they didn't save more than they did and surprised by how skimpy the aid offers were; I've never heard anyone say they're sorry that they saved too much. 

Seriously, let it go.  Do not criticize people who are trying to be nice, even when they don't do it in precisely the way you'd like them to.  Accept the gift in the spirit in which it has been given.

[ReadySetMillionaire]

Let it go.  They want to do something nice for their grandchild.  And it is completely reasonable for them to do it in their name, in their own account, both to get any tax benefits your state offers and to maintain control of the money.  And you don't have to worry about distributions affecting financial aid if you save their distributions for senior year.

Besides, with your likely income/assets, your kid is not going to qualify for any financial aid anyway.  And given spiraling college costs, your kid is going to end up with loans unless you personally are saving ridiculous amounts.  As someone whose kid is a freshman now, let me just say:  I've heard a gazillion people say they're sorry they didn't save more than they did and surprised by how skimpy the aid offers were; I've never heard anyone say they're sorry that they saved too much. 

Seriously, let it go.  Do not criticize people who are trying to be nice, even when they don't do it in precisely the way you'd like them to.  Accept the gift in the spirit in which it has been given.

Got it; although, for future reference, they get the tax benefit whether it's in their name or whether they write checks.

But point taken.

[trashtalk]

We have relatives who reward us for tolerating their mental disorders and emotional abuse with big checks.

I'm less worried about the 529 than the trust funds, but it's outside my circle of influence so I just shrug and move on.

[KCM5]

529s held by grandparents have the benefit of not being included in assets for the FAFSA, unlike 529s held by parents. Although, yes, distributions still affect it. So it is actually a bit better for it to be their 529 rather than yours.

I suspect this isn’t really about the 529. I know how hard it is to not let irritations leak into the rest of your interactions with your parents!

[Captain FIRE]

Yes, it can suck that they want to do their own thing so you can't optimize your plan, but unfortunately when it's a gift you can only say "thank you".  I'd be thrilled if the grandparents were annually saving in a 529, even if I didn't control it!  My mom is particularly obnoxious to remind me several times now that we need to save in a 529.  Yes, we are doing it, but he's only 2 (and we're paying for daycare right now!), and if you aren't contributing to it, IMHO it's rude to ask us about our financial planning.  It's not like she asks me about my 401k contributions or salary, so I take it just as a (passive aggressive?) way she is trying to express that they will give nothing, rather than just being silent, which is a politer way of accomplishing the same goal.

We have one set that vaguely said a comment about doing something for college, but nothing further. Would it be awesome if they'd be more specific/commit if they are doing anything?  Yes, of course, particularly because we're trying to front load our 529 contributions to max the benefit, so if they give in even 5-10 years it'd be excess.  But we just assume there will be nothing because that is safest.  If there is, great, that can cover the rest of college if our savings have not grown enough, grad school (we do not intend to cover any), or be passed down to their kids.

Also, I note that there are plenty of stories out there of grandparents giving directly and gifts being misused, so there is some rational thought to their plan too.  And it can affect college loans too.  ETA: They may also want their gift to go to the KID not you.  By that I mean they *want* to reduce any loans the kid takes out...not make it easier for you to save for the particular amount of funding you plan to provide.  (Note: Use their funds Junior spring or later to avoid having them counted as assets!)

[BostonBrit]

Let it go.  They want to do something nice for their grandchild.  And it is completely reasonable for them to do it in their name, in their own account, both to get any tax benefits your state offers and to maintain control of the money.  And you don't have to worry about distributions affecting financial aid if you save their distributions for senior year.

Besides, with your likely income/assets, your kid is not going to qualify for any financial aid anyway.  And given spiraling college costs, your kid is going to end up with loans unless you personally are saving ridiculous amounts.  As someone whose kid is a freshman now, let me just say:  I've heard a gazillion people say they're sorry they didn't save more than they did and surprised by how skimpy the aid offers were; I've never heard anyone say they're sorry that they saved too much. 

Seriously, let it go.  Do not criticize people who are trying to be nice, even when they don't do it in precisely the way you'd like them to.  Accept the gift in the spirit in which it has been given.

I completely agree with this and think that you're off side

[wellactually]

Frankly, your kid will be 18 when they start college and it won't really be up to you at that point if your adult child wants to accept a gift of college assistance from grandparents. You only get to decide what you contribute.

I did not have any college loans through a combination of achievement scholarships and then a bunch of help from parents (including about 5k in tuition each year, the house they bought to rent out in my college town, car insurance, and flip phone). But I always worked from age 16 on, they didn't cover any of my extras, and I saved a bunch even with years of low paying jobs after graduation.

Then I married into 54k in student loans and convinced DH we could pay it off in under two years. We finished in 21 months. So you never know, your kid may get to pay off student loans whether they need them or not!

My BIL is super well off. His oldest son is 17, jr in high school, and is a good kid. He's in honors classes and is very committed to track and field and cross country. Parents don't really want him to get a job and he doesn't seem to want to get a job. Okay, 17 isn't crazy for that and maybe they know his capability of handling things. But then he wants to give his girlfriend a nice necklace for christmas. So parents pay for that, along with a fairly new vehicle, pre-paid credit card for gas and hanging out, etc.

You can be well-off or pay for your kid's entire education cost without completely subsidizing their wants. If this is a value of yours, I have no doubt you'll find ways to live that out and require that from your kid. Having student loans isn't the only way to be disciplined.

Also, you have no idea if they'll keep contributing or not.

[nereo]

I would categorize this as: "A good problem to have" - and agree with what Laura33 wrote upthread.

~n~

[Dicey]

We started one for our grandchild, so of course I think you're being an ungrateful cad, lol. For the record, it is not saving us anything in taxes. We do it for a number of other reasons:

- It keeps us from buying plastic crap, which won't be remembered for long anyway.

- It gets the savings ball rolling earlier and faster than her parents are able to.

- They're getting established in their home and their careers. We're FI/RE. It's easy for us to save.

- We're not interested in assisting the parents in their day-to-day financial needs, as many other grandparents do.

- They took our advice to elope, which saved us a chunk of change, so we're happily funneling some of that to the next generation.

- We also believe that kids should have some skin in their own education so we are not saving enough to provide a full ride anywhere.

- Most of all, we both attended Community College with no financial help from our parents. We want to provide a larger measure of assistance than either of us received, without spoiling the kid.

- The 529 we chose has done quite well thus far. It's great for the parents to see "It's amazing how it grows!"

- As grandchild gets older, this will be a great way to illustrate the magic of investing and compound interest.

- Unless it happens through an inheritance because we're dead, in which case we won't  be here to care, we don't want to be an open checkbook when it comes to paying for college or anything for that matter. The money won't come directly from us, it will come from an investment account we started on their behalf. We see that as a big difference.

There are more, but I'm going to leave it there. I doubt anything I say will change your mind. I posted mostly for the benefit of others who might read this thread.

[gatortator]

I have seen your posts several times on this forum now.  From my internet stranger's perspective:

You have complained about the contractor who remodeled your bathroom, who charged more than he initially quoted.   In my book, though, it was still an awesome deal.

You complained about a friend who was not behaving the way you want him to.

You complained about your new life with baby is not similar to life without baby.

You complained that while your parents did come to your house for Thanksgiving and Christmas, they did not do it in the way you wanted them to.

You are now complaining that your parents are generously helping out with college costs but not in the way you want them to.

I am sorry that you feel poorly treated right now.   What you do you choose to do about these issues where you feel that people keep  behaving in ways that you don't like/ can't control?

[shelivesthedream]

We only have one kid.  Planning on a second hopefully soon.  As of right now, and assuming (God-willing) we are lucky enough to have a second kid, I don't plan on sharing his or her SSN with them.  This irrationally but really annoys me.

Pleeeeeaaaase don't do this. That's a really shitty thing to do to your second child and there will be absolutely no way to explain it to them that isn't "I didn't want your grandparents to save for your education the way they did for your brother".

You are taking this WAY too negatively. I have read your other threads and I totally get you experiencing this as a power play and them ignoring your wishes, but this is absolutely something you should let go. The amount of money will not be that meaningful when it comes to actual college costs, this is a GREAT place to direct grandparental impulses in a way that doesn't involve plastic crap, and it's only a power play if you let it be. You're already planning to save for college and not need this money, so if they ever try to hang it over your head ("If you don't X then we won't contribute any more") you can just shrug and say "OK". It takes two to tango and two to create tension.

Choose to believe (until you have specific evidence otherwise - and then see "shrug and OK" above) that they are just trying to do something nice - which is actually well in line with your values! (Saving, investing, no plastic crap.) Be grateful they're putting money into a savings account instead of blowing it on crap!

You say you're "always" going to have to keep track of it. Seriously? Schedule an email to yourself in ten years time to ask about it and just act like it doesn't exist until then. That'll give you plenty of time to adjust your saving plans if it turns out to have a lot more or less money than expected in it.

[nereo]

re: plastic crap and college savings - we have been blessed with a large community of like-minded friends and siblings with children just slightly older than ours; ergo we have all the books, clothes, toys and cheap plastic crap we could ever want for our toddler and are constantly turning down more.

As diplomatically as we could we stressed that our daughter - who is still way too young to know or care (16 months)- did not need **anything** for Christmas or for her birthday, and only if one felt inclined to really give something they were welcome to donate to her 529, but please no more cheap plastic crap.

guess what she got for Christmas?  I box of cheap plastic crap.

In short:  Take this as a win all around.  Grandparents could have bought your son some expensive toy in an obvious bid to win favor ("spoiling") - but they chose to put money towards his distant future.  When fighting 'battles', don't forget that not every action needs to be countered or rejected.  Sometiems even adversaries family do things we can approve of.

[ixtap]

In addition to all my separate frustrations in my other thread, my dad and his wife set up a 529 for my son without letting me know.  They asked for his SSN, and I assumed that it was for some life insurance beneficiary designation or something, so I did not ask.

Anyway, they are contributing $500 - $1,000 per year to this account.  I'm frustrated for a couple reasons because:

(a) Distributions from a 529 can eventually affect my son's eligibility for financial aid;

Maybe, maybe not. Perhaps your son will have ability based aid, rather than need based.

(b) My wife and I wanted to save a specific amount for school for our children, and their "black box" of saving is going to throw off that plan;

No, it isn't. You and your wife can still save a specific amount for your children and let them do their own thing.

 

(c) My wife and I wanted our kids to have *some* loans, because we both believe student loans kicked both of our asses into good financial gear, even if the loans sucked; and

There are other, probably better, ways of instilling financial values than forcing student loans on someone. Just because you turned out OK, does't mean it is the best way of doing things.

 

(d) It just makes things more inconvenient for me.  Now I'm always going to have to keep track of this and ask about it.

No, you don't. You need to ignore it until they offer it up. For all you know, they will end up draining it  before it is needed for their own expenses. After all, it is their money until they hand it over.

 

I approached my dad about rolling things over to the 529 account my wife and I set up, and he politely refused.  I asked why and he said "we just want to do our own thing for your son."  It just seems stupid and immature to me that they need a separate account and need to get their own credit.

I imagine they feel the same way about your request.

It goes without saying that I'm appreciative, and I communicated that very clearly. Part of me also feels that my other frustrations with my parents is clouding my judgment here, and that I'm being a dickhead for not just appreciating their gesture and moving on with life.

But I'm annoyed and feel like I need to re-visit this again because my son is my son, and this is going to annoy me for almost 20 years.

Am I off base here?

Yes.

Based on this and other threads of yours, I think you should consider counseling. The picture you present is of broken relationships where you are always second guessing the other party's motivations and means. You need to learn to deal with that and let go a little, while setting appropriate boundaries, for your own sanity.

[ReadySetMillionaire]

I have seen your posts several times on this forum now.  From my internet stranger's perspective:

You have complained about the contractor who remodeled your bathroom, who charged more than he initially quoted.   In my book, though, it was still an awesome deal.

You complained about a friend who was not behaving the way you want him to.

You complained about your new life with baby is not similar to life without baby.

You complained that while your parents did come to your house for Thanksgiving and Christmas, they did not do it in the way you wanted them to.

You are now complaining that your parents are generously helping out with college costs but not in the way you want them to.

I am sorry that you feel poorly treated right now.   What you do you choose to do about these issues where you feel that people keep  behaving in ways that you don't like/ can't control?

This forum is a place full of pretty darn intelligent people.  I post here to (a) give advice if I've gone through something similar or have knowledge on the subject; (b) vent a lot of the time; or (c) to vent and to seek advice.  I admit that I'm pretty neurotic and indecisive, it's something I've tried to work on. 

I probably come off as a turd, but I generally don't post my own threads if I'm not questioning or stewing over something.

[ReadySetMillionaire]

Got the memo everyone, I'll be grateful and move on.

[Dicey]

Got the memo everyone, I'll be grateful and move on.

Excellent!

[rockstache]

It’s too late now, but we absolutely are not giving out our daughter’s SSN and the grandparents are very annoyed with us for it. They wanted to set up a joint savings account for our daughter/one of them, and then give it to her whenever they deem appropriate. Sorry nope, not giving my daughter the present of your money with strings and whatever manipulation goes along with. You can contribute to the 529 we have, or make your own account with her in mind, but no one is getting her social or opening anything in her name.

[ReadySetMillionaire]

It’s too late now, but we absolutely are not giving out our daughter’s SSN and the grandparents are very annoyed with us for it. They wanted to set up a joint savings account for our daughter/one of them, and then give it to her whenever they deem appropriate. Sorry nope, not giving my daughter the present of your money with strings and whatever manipulation goes along with. You can contribute to the 529 we have, or make your own account with her in mind, but no one is getting her social or opening anything in her name.

While my OP stated other points, this is what I was ultimately getting at.  This is just something else that they can control and use to manipulate stuff.

I've lived with my family my whole life; I know the strings attached to stuff like this.  Obviously it's very generous, but the chance that there is no manipulation behind this is zero percent with my dad's wife.  Absolutely zero.   

If you have grandparents (or are a grandparent) who don't have strings attached, then that's absolutely great.  But that's not my family.

[shelivesthedream]

Yeah, but what if you just let go of your end of the string? You don't need the money. You have your own college savings. They can play their power game by themselves while you just shrug and say "OK".

[trashtalk]

It’s too late now, but we absolutely are not giving out our daughter’s SSN and the grandparents are very annoyed with us for it. They wanted to set up a joint savings account for our daughter/one of them, and then give it to her whenever they deem appropriate. Sorry nope, not giving my daughter the present of your money with strings and whatever manipulation goes along with. You can contribute to the 529 we have, or make your own account with her in mind, but no one is getting her social or opening anything in her name.

While my OP stated other points, this is what I was ultimately getting at.  This is just something else that they can control and use to manipulate stuff.

I've lived with my family my whole life; I know the strings attached to stuff like this.  Obviously it's very generous, but the chance that there is no manipulation behind this is zero percent with my dad's wife.  Absolutely zero.   

If you have grandparents (or are a grandparent) who don't have strings attached, then that's absolutely great.  But that's not my family.

It's for your kid* to go to college. Not you. Forget the account exists, don't include it in any of your financial planning, and if it's helpful for paying your kid's school expenses when the time comes, well, great.

*I believe 529 money can be transferred amongst siblings with no penalty so any second kids could benefit even if you don't share their SSN at this time. 

A line that keeps me from going crazy--especially when dealing with manipulative, narcissistic parents but also just in general--is: "You own nothing and you control nothing." The world does not operate on your or my say-so.

Another version might be "God, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference."

[ender]

Why not suggest the grandparents setup the 529 in their name?

[rockstache]

Additionally and this is just me - I believe that my kid’s privacy, identity etc are my responsibility until she reaches the age of majority. For me, this means whether it comes to social media (posting her face) or her SSN (giving it to no one) I’m going to be super careful until she’s at an age to make her own choices. Once that stuff is out there, there’s not really any getting it back.

[reeshau]

OP, this may not be your situation, but I thought I would give an explanation of my situation to illustrate that there can be good reasons for a Grandparent to want some control of their money.

My son, our only child, is four.  We planned to start a 529 for him before he was born, and opened it within a month of his birth.  We thought it was important to share this with our family, to communicate that education is important to us, and to invite them to this shared project.

When I talked to my in-laws about it, my FIL had a very astute question.  He asked, "what will you do if he chooses not to go to college?"  We had definitely thought about this.  My son's only cousins are kids of my brother.  They are a great, loving family, but they are not currently saving for college, so will likely struggle to fund it or have to take out loans.  So I had a ready answer that we would name the cousins as beneficiary.

My FIL is a great guy, but he pointed out a problem with that--he wasn't putting his money for someone else to go to college; he was concerned about his heirs, including my son.  That thought really let the air out of my balloon, because he was totally right.  We agreed the all-together 529 wasn't going to work.  But FIL still wanted to help some way, so went back to think on it.

What they did is they put a gift to our son in their will, with an amount payable when he's 25.  They know that we will have a 4 year, public school degree covered.  They have shared the amount they have set, which would cover 4 years in a private school, frankly.  But if all works out well, then he has a house, or a good down payment on a house.  Or grad school.  A leg up, for sure,

It's an amazing gift, and one we won't tell him about beforehand.  Grandparents may or may not, but as a way to coordinate what are gifts to our son, I have felt better and better about it over time.  Knowing they wanted to give so much, another 529 wouldn't have been a good fit.  Having the options will help him in many different scenarios, and we have been able to express ourselves in the way we are most comfortable with.

So, as I look to your situation, I can imagine in a mixed household with your stepmother, the idea of who gets what can be complicated.  The need for their own account may be a compromise to keep the peace within the household.  Of course, they should tell you that ideally, but I do see daylight in their insistence on keeping control.  Or, they could be manipulative--can't lose the devil's advocate view on that.

[Laura33]

Yeah, but what if you just let go of your end of the string? You don't need the money. You have your own college savings. They can play their power game by themselves while you just shrug and say "OK".

This.  They can use the money to manipulate you only to the extent that you let them.  If you pretend the money isn't there in your own planning, you will be in a position to say thanks but no thanks if they put unacceptable strings on the gift down the road.

As I think Ann Landers once said, no one can abuse you without your permission.  The less attention you pay to their antics, the less power they have over you.

[ReadySetMillionaire]

Yeah, but what if you just let go of your end of the string? You don't need the money. You have your own college savings. They can play their power game by themselves while you just shrug and say "OK".

This.  They can use the money to manipulate you only to the extent that you let them.  If you pretend the money isn't there in your own planning, you will be in a position to say thanks but no thanks if they put unacceptable strings on the gift down the road.

As I think Ann Landers once said, no one can abuse you without your permission.  The less attention you pay to their antics, the less power they have over you.

Dealing with my family/their manipulation/stress has been terrible for almost 15 years now.  This has probably moved to the top of my list for new year's resolutions.

[Sibley]

ReadySetMillionaire, honestly, after having read and commented on at least 3 threads started by you, YOU NEED THERAPY.

Just stop with all the piddling annoyances. You are BEC with your family. I get it. It happens. Get your ass to therapy, stat. Because your dysfunctional family relationship is causing you widespread stress, distress, and problems. This IS impacting your child, because it is impacting you. This WILL impact your marriage, because it is impacting you. I know I'm seeing a very small piece of you, but the impression I get right now is that you're a cranky, miserable, irrational person overall. Unless you want to actually be that person, you need to change something.

THERAPY. Address the root of all this - your dysfunctional family relationship and your emotions around it. Learn to set and enforce actual boundaries. Take that step back, address the elephant in the room. Then take stock of everything else.

[ReadySetMillionaire]

ReadySetMillionaire, honestly, after having read and commented on at least 3 threads started by you, YOU NEED THERAPY.

Just stop with all the piddling annoyances. You are BEC with your family. I get it. It happens. Get your ass to therapy, stat. Because your dysfunctional family relationship is causing you widespread stress, distress, and problems. This IS impacting your child, because it is impacting you. This WILL impact your marriage, because it is impacting you. I know I'm seeing a very small piece of you, but the impression I get right now is that you're a cranky, miserable, irrational person overall. Unless you want to actually be that person, you need to change something.

THERAPY. Address the root of all this - your dysfunctional family relationship and your emotions around it. Learn to set and enforce actual boundaries. Take that step back, address the elephant in the room. Then take stock of everything else.

Appreciate your input and the input of others in this thread.

I think if you look at my post history, you'll see an inflection point of when I had my first kid.  My wife has been very emotionally involved with our son and, after going back to work, is pretty much at her emotional capacity.  I went from having her as a sound board to not wanting to overburden her with my own stresses. 

So, this forum has been an outlet of sorts.  I probably do come off as curmudgeonly, although I think my Employment Dilemma thread more accurately reflects my overall positivity and optimism.

Again, though, I appreciate your perspective.  I checked out the "Boundaries" book from the library that everyone has recommended.  I certainly need to work on that, as well as my circle of control.

[Mgmny]

Both of my son's sets of grandparents (2) contribute to separate 529s for him.

The first one wanted to be separate, no big deal.

The second one asked to contribute to ours, and we gave them the details, then after thinking about it long and hard, we changed our mind and asked them to set up their own.

Reason 1: We want him to know that his grandparents contributed to his education - they value it. If it's just from our 529, they might not see it as being from them.

Reason 2: We want him to know that WE contributed to his education. If we told him, "Yeah, this 529 with $XX,XXX in it is a hodgepodge of your parents and all your grandparents." it will be less meaningful to him.
 
Reason 3: What if I decide to change my asset allocation, and my father in law disapproves? What if he wants it in a high-fee mutual fund, but i'm happier in VTSAX? Or what if VTSAX is too risky when my son is 18 going to college next year, but my FIL says his money is better off in emerging markets? Not an argument i'm interested in having.

Reason 4: What if (i.e. When) I have more children, am I going to give each child the SAME sum from a single 529 account? Or am I going to contribute $100 weekly and whatever each one ends up with they get? Which is fair? Which one does the people contributing think is fair? Are my in-laws knowingly contributing to a 529 that will be for all 8 of my children? Will that knowledge change their contributions? IF i can afford $100 a week now, but end up with 5 kids, am i really going to contribute $500 weekly with all of them? What happens to the money that my first son got frontloaded at $100 a week but the rest of my children i dropped to $100 a month becuase I couldn't afford it?

These 4 reasons are why we decided to ask my inlaws to setup their own 529 and handle it themselves. Plus, there are minor tax advantages to setting up your own depending on the state you are in (in MN and WI where we are, this is the case). 

I would just be happy you have parents that are contributing at all!!

[Mgmny]

Also quick add:

Student loans suck. Don't willingly strap your children with them so that they learn to "get their asses whooped" or whatever you said. that's stupid and lazy parenting and logic.

I believe your retirement goals should come first and don't send your kids through college if you can't afford your own FI plans, but i don't think setting them up to get student loans is smart. You are purposefully giving your son a handicap in life. How about instead, you teach him the time value of money, and "your money or your life" principles, and he won't need loans to whoop his ass like they did to you.

Something I appreciated from my parents: They gave me $50k to go to school. I could have gone to any school I wanted, but i knew I had $50k. I could have chosen a school experience that cost $200k, or i could have lived at home and did community college and state school and worked through it, and had some leftover.

In the end, I appreciated this approach (and would have REALLY appreciated it if i would have known my parents were purposefully strapping me with loans hindering my ability to succeed), because i didn't want to waste the $50k on 1 year at Baylor (or whoever is most expensive nowadays), but i got scholarships and made it last all 4 years. I did have to go in debt for 1 year of post-graduate medical education, but that's another rabbit hole that doesn't need to be addressed here.

[ysette9]

I second this. We both managed to graduate loan-free from undergrad and it was an amazing gift. I got my employer to pay for my masters but my now-husband paid for his and took out loans for about half. He purposefully crammed what should have been a 1.5-2 year masters into 9 hellish months for financial reasons. it just about destroyed him. He would have had a better experience all around (mental health, learning and networking experience in school) had he not been so focused on the money side and instead put the learning first.

[Car Jack]

Just give the grandparents the SS # and be grateful for the help.  Some fun things to look ahead to.....from a parent of 2 kids currently in college.

First: Aid is NOT grants.  Unless you live below the official government poverty line, you'll get zero grants.  You'll get Stafford loans, which everyone filling out a FAFSA gets.  They're just wonderful in giving your kid "skin in the game" and I did that myself.  But they're crap loans with a front end 1.04% load that gets subtracted right off the bat and then a high interest rate.  In any case, I would strongly recommend that you find a PDF of the FAFSA form (any year) and fill it out by hand.  I did this and going through the tables and understanding the 4 contributing percentages (student income, student assets, parent income, parent assets) is great to understand along with the allowances.

Next, get to know what colleges cost.  Every college, by law has to have a Cost of Attendance documented.  Every one I've looked at has it on a web page.  They're worth looking at.  I get that you don't want controlling grandparents to be in control, but when a college all in costs $73k a year (what my older son's college costs), then all that goes out the window and any help is appreciated.  Perhaps look into what programs are available where.  Also understand that the often talked about 2 year community college, then transfer to 4 year state college can have drawbacks and you can expect to add at least a year going that route.  Why?  Each state college will have acceptable courses for each and every program.  Didn't take the right Physics course?  No credit.  (this actually happened to me).  Didn't get at least a B?  Not transferable.  Not enough writing in the English course?  Nope.  Oh...and a big one.  Merit aid is NOT offered to transfer students.  Most colleges say that right on their website.

On the saving (potentially) side.  All colleges will have listings of courses that will transfer in and the grade required.  My son found this in his last 2 years of college.  So he went part time officially at his private college and took courses at both the local community college and at the local state college.  Where his private college course cost about $4500, at the community college, it's $700 and state college, $900.  And going part time, he doesn't pay the bullshit student fee and a ton of other fees.

For the grandparents:  There's an IRS loophole in the estate reporting law.  I know both my mom and my wife's dad want the government to know nothing about their money.  And yes, they both go outside and shake their fist at clouds.  If anyone pays for tuition.....directly to the college.....for anyone.....that is NOT reportable as a gift.  Same is true for medical bills, by the way.  This has enabled my mom to make large contributions to our kids' college bills and my father in law, who lives in the same city as DS#1's college likes to go to the bursar's office and hand them a check in person.

[Sibley]

ReadySetMillionaire, honestly, after having read and commented on at least 3 threads started by you, YOU NEED THERAPY.

Just stop with all the piddling annoyances. You are BEC with your family. I get it. It happens. Get your ass to therapy, stat. Because your dysfunctional family relationship is causing you widespread stress, distress, and problems. This IS impacting your child, because it is impacting you. This WILL impact your marriage, because it is impacting you. I know I'm seeing a very small piece of you, but the impression I get right now is that you're a cranky, miserable, irrational person overall. Unless you want to actually be that person, you need to change something.

THERAPY. Address the root of all this - your dysfunctional family relationship and your emotions around it. Learn to set and enforce actual boundaries. Take that step back, address the elephant in the room. Then take stock of everything else.

Appreciate your input and the input of others in this thread.

I think if you look at my post history, you'll see an inflection point of when I had my first kid.  My wife has been very emotionally involved with our son and, after going back to work, is pretty much at her emotional capacity.  I went from having her as a sound board to not wanting to overburden her with my own stresses. 

So, this forum has been an outlet of sorts.  I probably do come off as curmudgeonly, although I think my Employment Dilemma thread more accurately reflects my overall positivity and optimism.

Again, though, I appreciate your perspective.  I checked out the "Boundaries" book from the library that everyone has recommended.  I certainly need to work on that, as well as my circle of control.

Good. That's a start. And yes, I fully understand that your posts are a small piece of you. The problem is that the small pieces that are unhappy and knotted up will eventually impact everything else. It's like when you pull a muscle - you start with 1 unhappy muscle, and then everything else gradually gets impacted until everything hurts.

Dealing with dysfunctional families isn't a one time thing. Boundaries enforced can change the original conditions. Sometimes other factors result in changes. Unless you go completely non-contact with everyone (which is pretty extreme), you will be adjusting and evolving for the rest of your life. This is why a therapist can be so helpful, because they can help you learn the skills and techniques you'll need, in addition to untangling whatever emotional responses and patterns that need it. Depending on the exact flavor and severity, people coming out of these families can end up needing to completely relearn all sorts of things. You probably aren't a complete basketcase (they generally aren't with it enough to get to this kind of forum, but reddit is full of them), but there will be some things you need to examine.

[teacherwithamustache]

When my parents opened up a 529 for our kids I was very grateful.  When I politely asked how much they were putting in dad refused to tell me.  So I have no idea how much is in either of their accounts.  Therefore I have no idea if I am saving enough on my end for the kids.  This really upset me in the beginning.  Then I found my dads statements when he asked me to bring in the mail while he was on vacation.  Now I know how much is in there and can adjust my other savings vehicles accordingly.

The boomer generation (And every generation) deal with money differently.  I teach econ and parents would rather talk to their kids about their sex life then talk to them about money.  People are weird about money.  There are perfect strangers on a message board that know more about my financial situation then good friends I see all the time.  Now that is weird as well!

[Mgmny]

When my parents opened up a 529 for our kids I was very grateful.  When I politely asked how much they were putting in dad refused to tell me.  So I have no idea how much is in either of their accounts.  Therefore I have no idea if I am saving enough on my end for the kids.  This really upset me in the beginning.  Then I found my dads statements when he asked me to bring in the mail while he was on vacation.  Now I know how much is in there and can adjust my other savings vehicles accordingly.

The boomer generation (And every generation) deal with money differently.  I teach econ and parents would rather talk to their kids about their sex life then talk to them about money.  People are weird about money.  There are perfect strangers on a message board that know more about my financial situation then good friends I see all the time.  Now that is weird as well!

Yeah, this is admittedly my biggest complaint: 1 set of grandparents does not tell us how much they are putting away. I am slightly concerned that between us, grandparents 1, and grandparents 2 we will have TOO MUCH money, but that concern seems overblown insomuch that education is expensive!

[SailingOnASmallSailboat]

529s held by grandparents have the benefit of not being included in assets for the FAFSA, unlike 529s held by parents. Although, yes, distributions still affect it. So it is actually a bit better for it to be their 529 rather than yours.

As an FYI - current regulations (it's a loophole, really) are that while you're correct in that the 529 is in the parental assets so counts as "savings" in the FAFSA, FAFSA expects you (parents) to contribute up to 5.64% of said assets - but expects the student to contribute up to 20% of their assets. Grandparental 529 contribution paid to the school? Counts as a student asset in the year it's spent. Current regulations favor that 529 being in the name of the parent with the student as the beneficiary as opposed to being in the name of the grandparent with student as beneficiary.

[seattlecyclone]

529s held by grandparents have the benefit of not being included in assets for the FAFSA, unlike 529s held by parents. Although, yes, distributions still affect it. So it is actually a bit better for it to be their 529 rather than yours.

As an FYI - current regulations (it's a loophole, really) are that while you're correct in that the 529 is in the parental assets so counts as "savings" in the FAFSA, FAFSA expects you (parents) to contribute up to 5.64% of said assets - but expects the student to contribute up to 20% of their assets. Grandparental 529 contribution paid to the school? Counts as a student asset in the year it's spent. Current regulations favor that 529 being in the name of the parent with the student as the beneficiary as opposed to being in the name of the grandparent with student as beneficiary.

Yes and no. Spending out of a grandparent-owned 529 in the early years of school will definitely count more toward the EFC than a parent-owned 529 would. Spend out of the grandparent-owned 529 toward the end of the degree and you get the best of both worlds: leave it off the parental balance sheet the whole time, and it doesn't count against the student either until after they've filed their last FAFSA.

[SailingOnASmallSailboat]

529s held by grandparents have the benefit of not being included in assets for the FAFSA, unlike 529s held by parents. Although, yes, distributions still affect it. So it is actually a bit better for it to be their 529 rather than yours.

As an FYI - current regulations (it's a loophole, really) are that while you're correct in that the 529 is in the parental assets so counts as "savings" in the FAFSA, FAFSA expects you (parents) to contribute up to 5.64% of said assets - but expects the student to contribute up to 20% of their assets. Grandparental 529 contribution paid to the school? Counts as a student asset in the year it's spent. Current regulations favor that 529 being in the name of the parent with the student as the beneficiary as opposed to being in the name of the grandparent with student as beneficiary.

Yes and no. Spending out of a grandparent-owned 529 in the early years of school will definitely count more toward the EFC than a parent-owned 529 would. Spend out of the grandparent-owned 529 toward the end of the degree and you get the best of both worlds: leave it off the parental balance sheet the whole time, and it doesn't count against the student either until after they've filed their last FAFSA.

Yes! True - forgot to mention that. Since the FAFSA looks back 2 years (ie filing the FAFSA for the 20-21 school year takes into account the 2018 taxes, not 2019 taxes) you are 100% right on. Thanks for the catch.

[Zamboni]

This is a problem I wish I had. I worry more about my parents becoming homeless and depending on me to prevent starvation.

Also, thinking it is a good lesson for your kids to have student loan debt makes no sense to me. How about teaching them to be really careful about debt in the first place instead?

[secondcor521]

529s held by grandparents have the benefit of not being included in assets for the FAFSA, unlike 529s held by parents. Although, yes, distributions still affect it. So it is actually a bit better for it to be their 529 rather than yours.

As an FYI - current regulations (it's a loophole, really) are that while you're correct in that the 529 is in the parental assets so counts as "savings" in the FAFSA, FAFSA expects you (parents) to contribute up to 5.64% of said assets - but expects the student to contribute up to 20% of their assets. Grandparental 529 contribution paid to the school? Counts as a student asset in the year it's spent. Current regulations favor that 529 being in the name of the parent with the student as the beneficiary as opposed to being in the name of the grandparent with student as beneficiary.

Bold added.

I am fairly certain grandparent 529 disbursements count as non-taxable income for the student, not as a student asset.  Student income is FAFSA-taxed at 50%, although there are adjustments and allowances so depending on the circumstances it will likely be pretty high.  But given the new prior-prior FAFSA scheme, as long as you wait until junior year or so (*) it won't matter.

(*) Depending on how many years the kid ends up in school.

[Car Jack]

Yes....529s from non-parent become student income for the year it's spent, which is, of course the worst counted by FAFSA.  But here's the good news....if you actually fill out a FAFSA now (print a PDF), you're very likely to find that your EFC (expected family contribution) is more than the total cost of attendance.  2 years ago, mine was $93k.  Even so, DS#2 had a non-need-based scholarship that required FAFSA before funds were released.  So we filled it out.

[DaMa]

A Grandma here. 

I have both UGMA accounts and 529s for each of my 3 grandsons.  I mention the UGMA account, because I put $50 each birthday and Xmas in and that money is theirs however they want to spend it.  My mother and my other children also have put money in those accounts.

I also have the 529s for each.  I opened the 1st in 2015 before my 1st grandson was born, and was contributing a good amount, because I was still working.  I just opened ones for my other two grandchildren, but was concerned about what happens if they don't go to college, and how much I could afford to contribute now that I'm FIREd, impact to financial aid, etc.  I did a lot of research over the past month.   I decided that I will contribute $5000 per year (MI deduction limit), but I will keep the accounts in my name just in case I need that money back.  This is just a fallback for healthcare -- my grandsons will be 19, 16, and 15 when I turn 65 (Medicare). Like others here, healthcare in early retirement is my biggest risk.

There were a couple options that I don't think were mentioned:
1.  I can transfer ownership to my son at any time. 
2.  The SECURE act allows up to $10k of 529 funds to pay student loans.  This is an excellent option for grandparent funds since they can be distributed after graduation so no financial aid impact.

@rockstache, I had to have the SSN for both the UGMA and 529.  For the UGMA, only the child can withdraw funds after they turn 18, the custodian cannot.  You could go with your parents to set it up and give the SSN discretely to the banker.  I appreciate your point of view, though.  I have a father who uses gifts to create obligation.

[formerlydivorcedmom]

For perspective -

I have 529s set up for all of my kids.  My exhusband got custody of oldest kid's existing college fund when we divorced when she was 4.

We have a pretty good coparenting relationship, but he doesn't want to talk to me about anything to do with his finances, so I have ZERO idea whether or not the money in D's original college fund is still there or growing or if he changed it to make his stepson a beneficiary since he knows I'm saving for the kids.  It's a conversation that we'll have with each kid when they are applying to colleges - mom has saved $X for you, and dad .... ?

My ex's choices don't impact what I've decided to do for my kids.  They may impact the choices my kids make at ages 17-21.  I can't control that, so I just give a giant shrug and let it go for now.

I'm glad you have picked up the Boundaries book.  Don't dismiss the idea of therapy out of hand.  You can go to therapy without being totally broken - it's not a weakness to have a neutral person talk through things with you.  (Mine also makes book suggestions.)  Dealing with an infant and then a toddler is incredibly emotionally and mentally challenging, and when you add in toxic family members, it can be helpful to have a professional sounding board.

[rockstache]

@rockstache, I had to have the SSN for both the UGMA and 529.  For the UGMA, only the child can withdraw funds after they turn 18, the custodian cannot.  You could go with your parents to set it up and give the SSN discretely to the banker.  I appreciate your point of view, though.  I have a father who uses gifts to create obligation.

That would be an ok idea, except they were planning just a joint bank account. They don't want to tell her about it, they just want to give it to her whenever they decide. They specifically don't want her to be able to get it when she's 18. So maybe she'll be 18. Or maybe she'll be 35 and have a bank account somewhere in her name that they're doing goodness knows what with, with $50 in it. Or $50,000 (highly unlikely, but still). I think she deserves control over what's in her name. So if they want control, then it stays in their name.

[reeshau]

@rockstache, I had to have the SSN for both the UGMA and 529.  For the UGMA, only the child can withdraw funds after they turn 18, the custodian cannot.  You could go with your parents to set it up and give the SSN discretely to the banker.  I appreciate your point of view, though.  I have a father who uses gifts to create obligation.

That would be an ok idea, except they were planning just a joint bank account. They don't want to tell her about it, they just want to give it to her whenever they decide. They specifically don't want her to be able to get it when she's 18. So maybe she'll be 18. Or maybe she'll be 35 and have a bank account somewhere in her name that they're doing goodness knows what with, with $50 in it. Or $50,000 (highly unlikely, but still). I think she deserves control over what's in her name. So if they want control, then it stays in their name.

...and if it's earning anything, that could be a tax problem for her, too.  (i.e. missing a 1099)  That would be the wrong way to discover the account.

[marble_faun]

My dad tried to do the same with our infant child not long ago.  I got a phone call asking me, out of the blue, for our baby's social security number, for "surprise" reasons. I guessed that he wanted to set up a 529, which turned out to be accurate.

As with you and your family... I have an odd/strained relationship with my father and don't want him to be entangled in my financial life. BUT I also didn't want to be rude or turn down a gift that (after all) wasn't for me, but for my child. 

I told my dad that my husband and I were already planning to set up our own 529.  But he was quite adamant that HE wanted to set up the account for us, promising that he would turn it over to us, and he kept asking for the SSN.

The discussion became incredibly awkward, since I refused to give him the SSN.  But I took the tactic of appealing to his pride, saying I respected his financial acumen and appreciated his generosity.  I asked him to do the research on the best 529 plan for us, which I would then set up myself.  This somehow mollified him.  He could apply his skills and be a part of the 529 from the very beginning.  He did some research and we weighed the options, then I set up a plan. 

My dad then mailed a very generous check in to the account!  I really was grateful and would much rather have something like this than any other type of gift.

Anyway, I know it's too late for you to take this path now, but I wanted to post since I had a similar reaction to a similar situation.  With some parents, there is no such thing as a free lunch, and you have to be wary of what you are getting into, even with something that seems like a straightforward kindness.