Grandparents College Funds

[Tay N Evie's Mom]

Sorry, I may be in the minority, but as a parent of twins who are seniors in high school and in the middle of college selection right as we speak, I'd be ticked it someone opened any type of account in my kids names without my knowledge or consent. And, I think a lot of questions need to be worked out now, so when the time comes there are clear guidelines regarding the money.
Who is going to manage that money when the time comes? What if the child doesn't have the desire or ability to make it in college? Are you, as a grandparent, expecting a say in how the money is used and what happens if you don't like what they're going to do with it?

 

[Darcy03231]

I started an account for my niece when she was born for college. Her parents have no idea. She's now 12. The account is in my name and funded with my money. I pay the taxes on the interest earned. Her parents have no right to know until I'm ready to tell. I'll tell her when she gets closer to college age, most likely around her junior year.

If the account is set up in the child's name the parents would have to know as the bank would require the child's social security number. I opted to not go this route as I didn't want her parents to know, for a variety of reasons.

 

[Sadie22]

I started an account for my niece when she was born for college. Her parents have no idea. She's now 12. The account is in my name and funded with my money. I pay the taxes on the interest earned. Her parents have no right to know until I'm ready to tell. I'll tell her when she gets closer to college age, most likely around her junior year.

If the account is set up in the child's name the parents would have to know as the bank would require the child's social security number. I opted to not go this route as I didn't want her parents to know, for a variety of reasons.

If you change your mind or if the child gets a free ride to college, then these funds can be used for another purpose. This is wonderful that you are doing this. This is what I would recommend that the original poster do.

 

[wilkeliza]

My grandparent's set up a "college fund" for each of their grandchildren. I put college fund in quotations because it was expected to be used for college but I was the only one of 6 grandchildren who used it for such. We didn't get much to be honest. My grandparents put 100 on every birthday into the account which meant we had 1,800 at graduation. The account was turned over to us on our 18th birthdays or high school graduation which ever one came second. 4 of the 6 blew the money, one invested it, and I used it for incidentals my freshman year of college. We were always aware the money was there and I think that created issues with it as some of my siblings and cousins expected it to be bigger since it was called a college fund originally. My grandparents realized quickly during our jr high years not many of their grandkids were going to go to college so they just started calling it our gift.

Edited to add that I just read some of the comments. I'm actually shocked at how many people would be upset if this was kept as a surprise. Why is it so upsetting to think your parents (or a close family friend who acts as grandma/grandpa) would set up an account to stash away money for your kids? Most grandparents I know did not have these accounts in their grandchildren's name and it was written in the will and referenced account numbers for whose is whose in case anything happened to them before the gift was given. I didn't even come from a wealthy family and this was pretty common. We only knew because my grandma would write in our birthday cards 100 for now and 100 for later. Our parents never thought twice about this as it was a gift! If it is truly for college only and your kid doesn't go to college then grandma and grandpa can keep it or choose to give it to them to help start their adult life.

 

[NFLDERS]

I honestly do not understand how people can "set up" their Dg's education costs when putting monies away for retirement needs; so that our children will not have to care for us.

We raised 2 sons, met them half way with post secondary tuition, and some expenses ie illness met shortcomings of their ability to pay short term expenses.

I like to think providing for them, and raising 2 educated, adjusted, young men (married with children) was our job done now it's their turn. After all, we've been there done that "once."

That which others do is of course their business, God bless you.

 

[HM]

You would have made out much better if you opened a 529 for her (when she was younger). We have one for all of our kids, and definitely have a lot more for tuition than if we left it in a checking account (or under a mattress...). Even after the market issues 10 or so years ago, we were still thousands ahead for dd19.

Not necessarily. We lost a lot of money in our 529s in 2008. It took three years just to get back to where we were when the stock market crashed and that was the year we started paying for DS's college. We would have had more money if we'd just put it in a bank account.

 

[MickeySP]

Sorry, I may be in the minority, but as a parent of twins who are seniors in high school and in the middle of college selection right as we speak, I'd be ticked it someone opened any type of account in my kids names without my knowledge or consent. And, I think a lot of questions need to be worked out now, so when the time comes there are clear guidelines regarding the money.
Who is going to manage that money when the time comes? What if the child doesn't have the desire or ability to make it in college? Are you, as a grandparent, expecting a say in how the money is used and what happens if you don't like what they're going to do with it?

1st the account is in my name with DGDs as beneficiaries if something should happen. The administrator is my XDH, as he is in finance, again think VP of large institution who deals specifically in pensions & trusts. No I expect no say in where they go, nor do I care where they go. The guidelines are the money is to be used for secondary education after HS. If the don't go we will do what we did with DS's college fund. My DS was lucky enough to get a full ride so that college money went to him when he was ready to buy his 1st home. What I won't do is hand a pile of cash to an 18yo.

I honestly do not understand how people can "set up" their Dg's education costs when putting monies away for retirement needs; so that our children will not have to care for us.

We raised 2 sons, met them half way with post secondary tuition, and some expenses ie illness met shortcomings of their ability to pay short term expenses.

I like to think providing for them, and raising 2 educated, adjusted, young men (married with children) was our job done now it's their turn. After all, we've been there done that "once."

That which others do is of course their business, God bless you.

My retirement is safe & sound & fully funded. Again having been married to a person in the financial industry that has been locked down for a long time. I raised a well educated DS. They are self sufficient it is the big extras that if we can help with we do, they don't ask we offer & if accepted, NSA.

 

[mefordis]

just wondering how many like us are doing the college fund thing?

My DS makes a good living but has little for extras just now. We have all our debt/mortgage paid so we set up college funds for both DGD. However the parents don't know. Plus we bought life insurance investments for both girls.

How many of us are out there? Oh they have no idea, would you let them know or just make it a graduation present?

Info - 1 is 7yo the othe is 2yo.

I would not let them know. You want them to still save because by the time your grandchildren get to college, the cost will be astronomical and I'm sure they will still need to contribute a good deal. Also, what if something happens (God forbid) and you need to tap into that money?

My inlaws tell us they have a college fund for my dds but I pretend that it isn't there. I feel like if I don't have the money in my hand, it is not mine.

I'd like to add that they may also, if told about the account, imagine it to be larger than what it is, which would create disappointment. It's better to be surprised and get money as a bonus than to have them get their expectations all out of whack.

Money changes relationships, too. Sometimes not for the better. I would definitely save this money privately then hand it over when/if you are ready to do so.

Also, I cannot imagine anyone being "ticked off" for being given such a generous gift.

 

[RitaE]

As somebody who has been paying college expenses for kids since 2008 (and still going), I would have been anything BUT ticked if I would have found out a family member had a secret savings account.

There are some limits of how much can be saved in a 529 account, assuming that is what you are using. But if your son's budget is that tight at the moment it is doubtful that will be an issue anytime in the near future. And if the child decides not to attend college the penalties are much less drastic than what most people imagine. You only pay a penalty on the earnings, not the contributions. And the money can be moved to another beneficiary penalty free.

 

[wilkeliza]

As somebody who has been paying college expenses for kids since 2008 (and still going), I would have been anything BUT ticked if I would have found out a family member had a secret savings account.

There are some limits of how much can be saved in a 529 account, assuming that is what you are using. But if your son's budget is that tight at the moment it is doubtful that will be an issue anytime in the near future. And if the child decides not to attend college the penalties are much less drastic than what most people imagine. You only pay a penalty on the earnings, not the contributions. And the money can be moved to another beneficiary penalty free.

I think it isn't a 529 account as they mentioned using it for a house if not for college.

 

[Kenny1113]

just wondering how many like us are doing the college fund thing?

My DS makes a good living but has little for extras just now. We have all our debt/mortgage paid so we set up college funds for both DGD. However the parents don't know. Plus we bought life insurance investments for both girls.

How many of us are out there? Oh they have no idea, would you let them know or just make it a graduation present?


Info - 1 is 7yo the othe is 2yo.

Yes, my dad did this for my kids and my sister's kids when they were born. Like pp I treat it like its not there. DH and I have taken other steps to help with college costs. I agree -I would not be upset by family doing this without my knowledge.

 

[barkley]

1st the account is in my name with DGDs as beneficiaries if something should happen. The administrator is my XDH, as he is in finance, again think VP of large institution who deals specifically in pensions & trusts. No I expect no say in where they go, nor do I care where they go. The guidelines are the money is to be used for secondary education after HS. If the don't go we will do what we did with DS's college fund. My DS was lucky enough to get a full ride so that college money went to him when he was ready to buy his 1st home. What I won't do is hand a pile of cash to an 18yo.

I may be mistaken, but having administered 2 estates (one a trust one w/a will), in most cases so long as the beneficiaries (or POD's) on those accounts (and life insurance policies) are named as your granddaughters you can't establish guidelines on how it's dispersed upon your death. you could express your wishes that it be used for post secondary education, but the life insurance company will simply issue a check to the named beneficiaries, and the bank or financial institution will do likewise (w/life insurance and accounts naming beneficiaries I as the administrator of the estates couldn't even get involved-it wasn't part of the estate it was now legally owned by the named beneficiaries).

if you want some kind of guidelines like you spoke of doing with your ds you could set up a living trust for yourself and name the trust as the beneficiary of those specific funds THEN you could set up the guidelines you desire (and you might want to think in your heart of other situations you would feel appropriate for the money to be used-because not everyone is capable of going to college or owning their own home*).


*I only mention this b/c when dh and I met w/a very skilled elder law attorney regarding various estate planning strategies she shared that one of the most difficult issues she deals with regarding estates is where grandparents have with the best intentions set up what they intended to be education accounts but they weren't structured correctly such that they either are not used for the intended purpose-OR they've set them up so rigidly-for ONLY education or ONLY the purchase of a home which for someone like our ds (disabled long after his grandparents drafted their estate plans/were capable of understanding/recognizing) is likely not in the cards. now, neither of the grandparents set up these kinds of accounts for the grandkids, but the attorney said she's seen plenty of trusts with massive sums of monies sitting in them only earmarked for specific purposes that will continue to sit there b/c no provisions were made for a grandchild to use these funds for anything other than education.

 

[Allison]

I honestly do not understand how people can "set up" their Dg's education costs when putting monies away for retirement needs; so that our children will not have to care for us.

I can easily understand it. People have different amounts of money. Some can do more than others. I know several people who could save for a college education and still have enough money for their retirement.

 

[lustergirl]

I have a college fund setup for my new grandson.

 

[MickeySP]

I may be mistaken, but having administered 2 estates (one a trust one w/a will), in most cases so long as the beneficiaries (or POD's) on those accounts (and life insurance policies) are named as your granddaughters you can't establish guidelines on how it's dispersed upon your death. you could express your wishes that it be used for post secondary education, but the life insurance company will simply issue a check to the named beneficiaries, and the bank or financial institution will do likewise (w/life insurance and accounts naming beneficiaries I as the administrator of the estates couldn't even get involved-it wasn't part of the estate it was now legally owned by the named beneficiaries).

if you want some kind of guidelines like you spoke of doing with your ds you could set up a living trust for yourself and name the trust as the beneficiary of those specific funds THEN you could set up the guidelines you desire (and you might want to think in your heart of other situations you would feel appropriate for the money to be used-because not everyone is capable of going to college or owning their own home*).


*I only mention this b/c when dh and I met w/a very skilled elder law attorney regarding various estate planning strategies she shared that one of the most difficult issues she deals with regarding estates is where grandparents have with the best intentions set up what they intended to be education accounts but they weren't structured correctly such that they either are not used for the intended purpose-OR they've set them up so rigidly-for ONLY education or ONLY the purchase of a home which for someone like our ds (disabled long after his grandparents drafted their estate plans/were capable of understanding/recognizing) is likely not in the cards. now, neither of the grandparents set up these kinds of accounts for the grandkids, but the attorney said she's seen plenty of trusts with massive sums of monies sitting in them only earmarked for specific purposes that will continue to sit there b/c no provisions were made for a grandchild to use these funds for anything other than education.

Honestly I do not feel the need to go into the intricacies of how accounts are set up. Just trust that my father owned his own law firm, 3 cousins, 1 nephew & 2 nieces are lawyers, & my XDH has been in finance for over 30 years, pretty sure we got it covered.

 

[barkley]

Honestly I do not feel the need to go into the intricacies of how accounts are set up. Just trust that my father owned his own law firm, 3 cousins, 1 nephew & 2 nieces are lawyers, & my XDH has been in finance for over 30 years, pretty sure we got it covered.

nowhere in my post did I inquire of how your accounts were set up-it was you who originated the thread and offered up details, I was only making a comment based on experiences administering estates-

1st the account is in my name with DGDs as beneficiaries if something should happen.

 

[MickeySP]

nowhere in my post did I inquire of how your accounts were set up-it was you who originated the thread and offered up details, I was only making a comment based on experiences administering estates-

With all due respect the tenor of your post was more of "Lady you need to do it this way" Hence questioning my ability to manage these financial transaction. I am 54 and quite capable of knowing how to contact the proper people to set up these accounts.

If this is not how you meant it, sorry.

 

[NFLDERS]

I can easily understand it. People have different amounts of money. Some can do more than others. I know several people who could save for a college education and still have enough money for their retirement.

For some people it's not always about money either I suppose; I had to re-evaluate my reply. DH, and I both worked in our chosen careers for almost 40 yrs, and retired (11 yrs to date) at 55ish. For some it's more about building character as is in our case.

When our grands were born we were met with comments about spoiling them being grandparents; We replied that we didn't spoil their fathers, and would not be spoiling them.

Don't get me wrong gifts are given, and at times generous Disney cruise from Canada with grandchild ie.

 

[Allison]

For some people it's not always about money. DH, and I both worked in our chosen careers for almost 40 yrs, and retired (11 yrs to date) at 55ish. At times it's about building character in our case.

When our grands were born we were met with comments about spoiling them being grandparents; We replied that we didn't spoil their fathers, and would not be spoiling them.

Don't get me wrong gifts are given, and at times generous Disney cruise from Canada with grandchild ie.

Your original quote was about money. You didn't understand how people could put away for retirement and college so that their children didn't have to take care of them.

 

[RitaE]

For some people it's not always about money either I suppose; I had to re-evaluate my reply. DH, and I both worked in our chosen careers for almost 40 yrs, and retired (11 yrs to date) at 55ish. For some it's more about building character as is in our case.

When our grands were born we were met with comments about spoiling them being grandparents; We replied that we didn't spoil their fathers, and would not be spoiling them.

Don't get me wrong gifts are given, and at times generous Disney cruise from Canada with grandchild ie.

That seems kind of opposite of how most people feel. I certainly don't think Grandparents have any obligation to help pay for college, I don't even think parents are obligated to pay for college. However, I'd think generous gifts and Disney Cruises are far more frivolous than College. If I had to point at the one most likely to spoil a child and less likely to build character, personally I'd pick the Disney cruise.