- Funding a 529 plan with gifts is a great way to save for college.
- Gift tax rules allow up to $19,000 Annually per donor without tax consequences, with the option of additional five-year financing at once.
- Communication with parents is important to ensure contributions align with their 529 plan strategy.
For grandparents, aunts, uncles, and other relatives, making the gift of education savings can be one of the most important contributions to a child’s future. A 529 plan It is a tax-advantaged college savings account that allows money to grow and be withdrawn tax-free when used for qualified education expenses.
With tools like Backer, Upromise, and direct contributions to a 529 plan, contributing to a student’s education is easier than ever.
But before sending a check, there are important factors to consider, including how you’ll contribute, tax rules, and how these gifts affect financial aid eligibility.
Related to: The ultimate 529 plan guide by state
Ways to file a 529 plan
Relatives have several options for contributing to a 529 plan, depending on their preferences and the tools available for the specific account.
1. Direct contributions to an existing 529 plan
Most 529 plans allow friends and family to contribute directly to the existing account. Many countries offer gift portals, e.g giftwhich generates a unique code that can be shared with relatives. Some plans also offer the option to send gift cards or make online contributions.
If contributing by check, be sure to include the beneficiary’s name and account number to ensure funds are allocated correctly.
2. Booster: Crowdfunding option for college savings
Supporter It is a platform designed to help families crowdfund their college savings. Parents create an account, and friends and relatives can contribute with just a few clicks. The platform makes it easy to automate the gifting process and sending contributions for birthdays and holidays. Read our full booster review.
3. Futuremoney: Crowdfunding option for college savings
Future money is a new platform that makes opening and setting up a 529 plan extremely easy for families. One of its main advantages is that it makes gifting to a 529 plan easy as well. Read our full review of Futuremoney.
4. Settlement: Earn rewards for college savings
Waiver It is a rewards program that allows participants to earn cash back on everyday purchases and deposit rewards into a 529 plan. Although this is not an immediate gift, it is a great way for relatives to passively contribute to a child’s education over time. Read our full Upromise review.
Gift tax rules and contribution limits
For 2025 and 2026, individuals can contribute up to $19,000 per recipient ($38,000 for married couples) without federal gift taxes. This means a grandparent or other relative could contribute $19,000 to a 529 plan per grandchild per year without having to file a gift tax return.
Superfunding a 529 plan
For those who want to make a larger lump sum contribution, the IRS allows a strategy called five-year gift tax averaging. This means an individual can contribute up to five times the annual gift tax exclusion ($95,000 in 2025 and 2026) at once, with the amount spread over five years for tax purposes.
This strategy is especially useful for reducing estate taxes while making a significant impact on a grandchild’s education savings.
Financial Aid Considerations
529 plans owned by other relatives are treated more favorably in financial aid accounts than those owned by the parent. This may play a role in how you want to give.
- Parent-owned 529 plans: Consider as parental origin and get Low impact On financial aid (up to 5.64% of the balance It is considered in aid calculations.
- Grandparent-owned 529 plans (or other relative-owned plans): It does not count as an asset on the FAFSA and no longer affects aid eligibility.
For families concerned about the implications of financial aid, it may be beneficial for grandparents to contribute directly to a 529 plan they own versus using a plan owned by a parent.
Communicate with parents before gifting
Before making a contribution, it is important Relatives to coordinate with parents To ensure that funds are directed to the correct account. Some key questions to ask:
- What is a 529 plan used for? Not all plans accept third-party contributions.
- Do parents prefer direct deposit or a gifting platform? Some families use it Supporter or waiverWhile others prefer traditional contributions.
- Is financial aid a concern? If so, parents may have a strategy in place to reduce the impact of 529 withdrawals on aid eligibility.
By discussing these details in advance, gift givers can ensure this Their contribution is used effectively While avoiding unintended tax or financial aid complications.
Don’t miss these other stories:
