When most people think about leaving a legacy, they often envision financial wealth, heirlooms, or real estate passed down through generations. But there’s a different kind of legacy—one that’s living and breathing, one that empowers. It’s the gift of education.

Giving your children or grandchildren the opportunity to pursue their education without the burden of overwhelming student loans can have a generational ripple effect. Today, this is more important than ever.

Why Education Should Be at the Heart of Your Legacy

The cost of education has skyrocketed in recent decades, outpacing inflation and wage growth by a wide margin. While a college degree still opens doors—providing significantly higher lifetime earnings and lower unemployment rates—the cost of that degree often comes with a hefty price tag.

That burden can delay life goals like homeownership, marriage, or saving for retirement. For graduates just starting out, this debt can feel like a weight that holds them back before they’ve even had a chance to begin. That’s where proactive planning, and specifically 529 plans, come into play.

What Exactly Is a 529 Plan?

A 529 plan, sometimes referred to as a Qualified Tuition Program, is a state-sponsored, tax-advantaged investment account designed to help families save for education. These plans are available in nearly every U.S. state and offer a unique mix of tax benefits, investment growth potential, and flexibility in how and where the funds can be used. While there are technically two types of plans, “prepaid” plans and “savings” plans, we will focus on the “savings” plan, as it is by far the most utilized and most flexible option.

Here’s how it works:

• You fund a 529 plan using after-tax dollars. Some states sweeten the deal by offering state income tax deductions or credits for contributions to their in-state plans if you’re a resident or have earned income there.
• Once funded, your investments in the plan grow tax-free—both income and capital gains.
• When it’s time to pay for education, qualified withdrawals are tax-free as well.

And the list of qualifying expenses is impressively broad. In addition to college tuition, room, board, fees and other specified costs, you can use 529 funds for:

• Up to $10,000 per year for K–12 tuition;
• Accredited vocational schools and graduate programs in the U.S. and abroad; and
• Up to $10,000 in student loan repayment (one-time limit per borrower).

Plus, under the SECURE 2.0 Act, you now have the option to roll over up to $35,000 (lifetime limit) from a 529 plan into a Roth IRA for the beneficiary—tax and penalty free. There are some conditions, including: the 529 account must have been open for at least 15 years, and the rollover is subject to annual Roth IRA limits and the beneficiary’s earned income. And while this is a federal provision, some states may tax these rollovers, so it’s wise to double-check with your tax advisor.

Choosing and Evaluating a 529 Plan

Not all 529 plans are created equal. To choose the right one, start by asking: Does my state offer a tax benefit for contributing to its plan? If the answer is yes, that’s often a good reason to start there.

But don’t stop at the tax break—evaluate the plan’s investment options, fees, and flexibility. Plans that include low-cost, broadly diversified index fund choices and minimal extra fees may offer the best long-term growth potential.

And don’t fall for a common myth: you don’t need to send your child or grandchild to school in the state where the 529 plan is held. These accounts can be used at any eligible institution nationwide—or even internationally.

Who Should Own the 529 Plan? Parent vs. Grandparent Ownership

Ownership of a 529 plan matters, particularly when it comes to financial aid eligibility. Traditionally, distributions from a grandparent-owned 529 plan were counted as untaxed student income on the FAFSA, which could significantly reduce financial aid. However, beginning in the 2024–25 school year, new FAFSA rules no longer include distributions from a grandparent-owned plan in aid calculations—a major win for families planning together. That said, hundreds of private institutions use the CSS Profile in awarding their own financial aid, and in those evaluations, grandparent-held 529 plans will still be considered.

All that said, you may still want to coordinate with parents. In some states, grandparents can contribute to a parent-owned 529 plan and the family can still claim a state tax benefit. It’s a strategy that combines tax advantages with optimal financial aid outcomes.

Tips for Setting Up 529 Plans Strategically

When you're ready to begin, here are a few planning considerations:

1. Open a Separate Account for Each Beneficiary

This ensures each child or grandchild has funds earmarked for their education. Withdrawals must match the named beneficiary to qualify for tax-free status—paying for someone else’s education from the wrong account can result in taxes and penalties.

2. Use the Gift Tax Exclusion Wisely

In 2025, you can give up to $19,000 per beneficiary through a 529 plan contribution annually without triggering the federal gift tax. Want to go big? You can “superfund” the 529 account for each beneficiary by contributing up to five years’ worth at once—$95,000 individually, or $190,000 for couples.

3. Maintain Flexibility and Control

As the account owner, you retain full control—even after the funds are contributed. You decide when to withdraw, how the funds are invested, and if the beneficiary should be changed. If your own financial needs change, you can withdraw funds for non-qualified purposes; while the earnings portion is subject to income tax, a 10% penalty and potential recapture of any state tax benefits your received on your original contributions (if you had any), your original contributions are always accessible and not subject to any tax or penalty.

4. Consider Legacy and Transfer Rules

If your grandchild doesn’t attend college or doesn’t use all the funds, don’t worry. You can change the beneficiary to another qualified family member—siblings, cousins, even a niece or nephew’s spouse. And with the new Roth IRA rollover provision, there’s another future-friendly option on the table.

Conclusion: A Legacy That Grows

Education is one of the most meaningful legacies you can offer. And in today’s world—where student loan debt weighs down millions of young adults—a 529 plan provides not only a financial foundation, but a head start in life.

With its tax benefits, flexibility, and ability to support a variety of educational paths, the 529 plan is one of the most powerful tools available to families today. Whether you’re helping a grandchild attend college debt-free or building a cushion for future generations, starting early can make all the difference.

By thoughtfully using a 529 plan, you’re not just saving for school—you’re investing in futures, and writing your legacy one semester at a time.