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Does a 529 account work as a shower gift?
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Anonymous
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As a baby shower gift for my sister (who is pregnant with her first child), my husband and I were considering starting a 529 education fund for the baby. I'm curious if anyone else has ever done/received this as a gift? Not having kids ourselves, we are not super-familiar with all the options and rules, but I thought y'all would be! If we were to do this, how practically could it be done? E.g., can a fund be started before the child is born so that it could be a shower gift? Can we as donors give my sister investing control over the assets? Would my sister need to use the same fund we start for future contributions she makes, or (if she likes another plan better), can she start a second fund for the same child? Would love any insight from those who have set up a 529 plan (for their own children or especially as a gift) about the best way to work out these kinds of details. Thanks!
FWIW, I'd rather not just write a check to my sister "For Baby's 529." First, I don't like giving checks as shower gifts. Second, my sister is not the best with finances at this point in her life, and might not use the money to start the account when there are cute baby supplies on her radar. I apologize if that sounds sort of patronizing -- I don't mean to be (though flame at me if you think appropriate); I'm just trying to think of how to do something really helpful for my niece/nephew. |
Anonymous
I don't know the details of how it works but I think it is a very thoughtful gift. I'm pretty sure you can't start it till the baby's actually born. You could always give her a small 'typical' shower gift then explain to her in a card or privately that you and your husband are starting a 529 for the baby when it's born and the details about it. Again, I think it sounds really sweet and caring to give that as a gift
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Anonymous
Well the parents should control the 529. If any of the parents work for a firm and have a conflict of interest [investment firm is a client] they are in trouble. ie MD might use Vanguard. If the $ are a few hundred just buy the child a bond or cd. What if the child has a disability or does not end up in college? Your account could be a very painful ...... |
Anonymous
| FWIW both my husband and I have 529s set up for each of our nieces. We started it off with a large initial investment (for their first Xmas present) and now just kick in $50 a month. You designate a beneficiary when you set them up so despite us controlling them they are for the benefit of our nieces. Granted we could always change beneficiaries (which my SIL so nicely pointed out when we told her what we were doing) but we don't have any plans to unless the kids don't go to college. |
Anonymous
| PP here - I guess I should say that unless you plan on continuing to contribute at least the minimum to the 529, it probably doesn't make sense to actually set up an account b/c of fees. |
Anonymous
| You need a social security number to set one up, so you'll need to wait until the baby is born and credentialed. But I like the idea of giving a small shower gift followed by the larger "welcome baby" gift or Xmas present. Just be sure to tell the parents there's something larger coming so there's no hurt feelings or misunderstandings when they open a package of socks or whatever. |
Anonymous
| This iS a great idea! I got so many 0-3 or 3-6 month designer outfits that dd wore once or twice. All |
Anonymous
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That's a beautiful idea, but I don't think the shower is the appropriate place to give it. If you have her "open" it in front of people it kind of seems like you are trying to show everyone how rich and generous you are. I'm not saying that's the case but this kind of gesture can be easily misunderstood. I would get a small shower gift from her registry or of your choosing and then present the 529 privately when the baby is born.
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Anonymous
| but you don't need the kids' actual SS#; we opened two accounts for our future children (one born now) with one of our nephew's ss# and transferred it to our DD once she was born. |
Anonymous
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OP here. Thanks for the info so far.
1228/1230 poster: What do you mean by continuing to contribute the minimum? I thought that that there was an initial investment requirement ($250 I thought I read, though maybe it varies by plan), but did not know that there was a requirement for continued investing. Is that true? We're fine doing a large initial gift, but would likely leave it to my sister to continue contributing as she is able (except for potential special occasions). 1304: I was trying to avoid having to buy onesies, etc. (just not my thing). I thought that maybe as the older sister I could get away with a more-expensive-than-average gift and that would look appropriate, but I definitely see your point. |
Anonymous
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not PP, but some accounts have not just management fees, but account fees (like $50/year or something) if the value is under a certain amount. I think this is a great idea, and can answer a few questions: you do need an SS#, so it will have to wait. Once you have the SS#, you can open it in your name - this means you control it, can withdraw the $ as you see fit (with taxes and penalties), or can transfer to another beneficiary. Or you can walk your sister through the process, get it opened in her name, and write a check directly to it once it's open, so she cant divert the $ (at least not directly - if she controls it, she can withdraw with taxes and penalties).
I think it's a nice idea, even to hold your own for the benefit of niece/nephew, esp. if you envision contributing to it somewhat regularly. I send checks directly to the 529 my brother opened for his kids, but I guided him to open a good one, trust him not to divert, and since he contributes too I figured it was more important for him to know how much his kids had total, rather than me having a separate account. But that's a personal thing. |
Anonymous
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1228/1230 poster here...my understanding was that there would be a break in management fees if you did a monthly contribution. I just tried to find this on the MD529 website and couldn't, so I might be mistaken.
I did want to mention that a benefit in NOT having the parent control the 529 is that it isn't an asset of the parents' so shouldn't count against them when being evaluated for financial aid. So on one hand there is the state tax deductability (assuming you choose the right plan and your state allows this) but on the other hand if you have, say, a grandparent 'own' the plan then you have fewer assets that can be considered during finanicial aid. |
Anonymous
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My father wanted to set one up for my child and I said no. He wanted to put a large amount of money in each year and I still said no. I thought the idea was nice but I found it to be pushy and invasive. Don't trust me with a check- then keep your "charity" money.
I don't care if it would have completely paid for college. I am not giving anyone my childs SSN number and I don't like the idea of someone else controlling an acct related to my child. Now if he said he wanted to contribute to a fund that I already established- then okay. If he could do it with the SSN then fine. But that wasn't the deal so I said no and that is final. |
Anonymous
Crazy. |
Anonymous
oh honey- you are crazy. Seek help for your control issues. |