# Wealthy Grandparents Guide to Funding Newborn's Future > Grandparents can fund newborns' futures with tax-efficient accounts like 529s, UTMA, trusts, Trump Accounts, or taxable brokerage accounts. - Title: Wealthy Grandparents Guide to Funding Newborn's Future - Summary: Grandparents can fund newborns' futures with tax-efficient accounts like 529s, UTMA, trusts, Trump Accounts, or taxable brokerage accounts. - Keywords: 529 plans, utma accounts, trusts, trump accounts, taxable brokerage accounts, grandparents, newborn, education expenses, financial aid, tax implications, gift tax exclusions, roth ira - Source: Kiplinger — https://kiplinger.com/retirement/a-grandparents-guide-to-building-wealth-for-a-newborn - Published: 2026-11-08T14:05:00+00:00 - Read time: 2 min - Topics: 529 plans, utma accounts, trusts, trump accounts, taxable brokerage accounts, grandparents, newborn, education expenses, financial aid, tax implications, gift tax exclusions, roth ira ## Why Grandparents Should Start Early Becoming a grandparent for the first time is a special experience. Well-off grandparents may wish to support their grandchild from birth. ## 529 Plans for Education Savings 529 plans offer tax-deferred growth and tax-free distributions for qualified education expenses, with flexibility to change beneficiaries and roll over to a Roth IRA. > Contributions are not deductible on the federal return, but some states do provide tax benefits for the contributor ## 529 Plan Benefits and Risks 529 plans allow grandparents to retain control while funding education, but they can be restrictive and may not suit all children. > With a 529, you're signing up for handcuffs. ## 529 Plan Tax Implications 529 plans do not count as student income on FAFSA, but they may affect financial aid through CSS Profile and have rollover limits. > Current rules also provide some flexibility if the beneficiary doesn't end up needing all of the money for education, including one option to roll over a long-standing 529 account to the beneficiary's Roth IRA. ## 529 Plan Rollover Limit The cap on rollovers to a Roth IRA is $35,000 per beneficiary, but a bipartisan Senate bill would eliminate this cap. > A bipartisan Senate bill would eliminate the cap altogether ## UTMA Accounts for Minors UTMA accounts allow adults to manage investments for minors, but control transfers to the child at a specific age. > The gift from the grandparent to the newborn is irrevocable right away ## UTMA Tax Consequences UTMA accounts carry tax consequences including reporting unearned income and potential 'kiddie tax' for children. > If a child has enough unearned income, they may be subject to 'kiddie tax', where they pay the tax rate of their parents on unearned income over a certain amount. ## UTMA and Financial Aid UTMA accounts are reportable assets on FAFSA, potentially hurting a child's financial aid chances. > UTMA accounts are also reportable assets owned by the child on FAFSA ## Trusts for Financial Planning Trusts allow grandparents to specify when and why money becomes available for the grandchild, but require complex setup. > A trust could allow the grandparent to specify when and why money becomes available to the beneficiary, such as for buying a first home, education, healthcare, or other purposes. ## Trust Tax Implications Trusts have compressed tax brackets, with retained trust income hitting the top federal marginal tax rate at low income thresholds. > Retained trust income hits the top federal marginal income tax rate (37%) at very low income thresholds (just over $15,000) ## Trump Accounts for Savings Trump Accounts are recently launched savings options with tax-deferred growth and distributions restricted until age 18. > Trump Accounts are a recently launched savings option that grandparents can help fund ## Trump Account Limitations Trump Accounts have no tax deduction for contributions and are brand new, with uncertain long-term benefits. > 529s have been around for decades ## Trump Account Financial Aid Trump Accounts may affect financial aid, but they offer a $1,000 seed payment for children born between 2025 and 2028. > It's still unclear how these accounts might affect financial aid ## Taxable Brokerage Accounts Taxable brokerage accounts offer flexibility for education, healthcare, and other expenses without tax benefits. > Having that account grow, and then gifting assets to the child when they need it, retains control for the owner ## Step-Up in Basis at Death The step-up in basis at death allows grandchildren to inherit assets with tax efficiency when the grandparent passes away. > The best tax rule available to them, the one that will benefit the grandchild the most, is the step-up in basis at their own death ## Key takeaway Wealthy grandparents can use tax-efficient accounts such as 529 plans, UTMA accounts, trusts, Trump Accounts, or taxable brokerage accounts to fund their newborn grandchild's future education, home, healthcare, or other needs.