How Grandparents Can Use 529 Plans for Tax-Efficient Wealth Transfer

Published by In Phase Wealth Management

As college costs continue to rise, many Bay Area families are looking for ways to help future generations prepare for education expenses. One increasingly popular strategy is for grandparents to contribute to a 529 college savings plan.

A 529 plan can provide tax-advantaged growth for qualified education expenses while also creating potential estate planning benefits for grandparents.

Ways Grandparents Can Contribute to a John Hancock 529 Plan

Grandparents can help fund a grandchild’s education in several ways through a John Hancock 529 Plan.

Direct Contributions

Grandparents can contribute directly to an existing 529 account through:

• Check contributions

• Electronic funds transfer (EFT)

• Wire transfers

Typically, the grandparent simply needs the account number and beneficiary information to ensure the contribution is deposited correctly.

Ugift® Gifting Portal

Many 529 plans, including John Hancock plans, offer gifting tools such as Ugift®.

This allows parents to share a secure gifting code with grandparents, family members, or friends, making it easy to contribute online without sharing full account details. Contributions generally start at $50 or more.

Opening a Separate Grandparent-Owned 529

Grandparents may also choose to open and maintain their own 529 account for a grandchild.

This approach allows grandparents to:

• Retain control of the account

• Manage investment selections

• Control distributions

Under current FAFSA rules, distributions from grandparent-owned 529 plans generally do not negatively impact a student’s federal financial aid eligibility.

Potential Tax & Estate Planning Benefits

529 plans may also offer valuable gifting and estate planning opportunities.

Annual Gift Tax Exclusion

In 2026, grandparents can contribute up to:

$19,000

per beneficiary annually without triggering federal gift tax reporting.

Married couples can contribute up to:

$38,000

per beneficiary annually.

Five-Year Superfunding Strategy

Grandparents may also front-load contributions using the IRS five-year averaging rule.

This allows contributions of up to:

$95,000

per individual or:

$190,000

for married couples, while treating the contribution as if it were spread evenly over five years for gift tax purposes.

This strategy can help:

• Move assets out of a taxable estate

• Maximize long-term tax-deferred growth

• Accelerate college savings early in a child’s life

Why This Matters for Bay Area Families

For many Silicon Valley and Bay Area professionals, education planning is becoming an increasingly important part of multigenerational wealth planning.

With college costs continuing to rise, coordinated family contributions to a 529 plan may help reduce future financial stress while creating tax-efficient gifting opportunities.

Final Thoughts

529 plans can be a powerful tool for grandparents looking to support future education goals while potentially benefiting from estate planning flexibility.

At In Phase Wealth Management, we help Bay Area families coordinate education planning, tax strategies, and long-term wealth management to align with their broader financial goals.

Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.