As college costs rise and financial strategies become more complex, many affluent families are asking if 529 plans are still the smartest way to save for a child's or grandchild's education.
The short answer? Absolutely.
529 plans remain the gold standard for education savings — particularly for high-net-worth families who value tax efficiency, flexibility and long-term planning.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But like all financial tools, 529s work best when they're part of a broader, multilayered strategy tailored to your family's unique goals.
The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.
Here's why these plans are so powerful — and when you might consider complementing them with other approaches.
Why 529 plans still reign supreme
What makes 529 plans so effective is simple: tax-free growth and tax-free withdrawals for qualified education expenses. No other investment vehicle offers this combination of benefits specifically for education savings.
But the advantages go even deeper for affluent families:
Estate planning leverage. Contributions are considered completed gifts and are removed from your taxable estate — ideal for grandparents who want to reduce estate size while supporting future generations.
Front-loading flexibility. In states that offer a tax deduction for 529 contributions, front-loading five years' worth of gifts can provide a meaningful tax benefit.
It also gives the assets more time to grow tax-free, maximizing the long-term impact of your contributions.
Financial aid optimization. Compared with taxable brokerage accounts, 529 plans are typically treated more favorably in the financial aid process.
When a grandparent owns a 529, the account is not reported on the FAFSA, which can improve a student's eligibility for need-based aid.
More uses than you might think. Funds can be used for K-12 tuition (up to $10,000/year per student), and unused funds can be rolled over to a Roth IRA for the beneficiary — up to $35,000 over five years under the SECURE 2.0 Act's rules.
There are many stipulations that come with these transfers for them to be compliant, but this is a great way to utilize overfunding.
Portability. A common myth is that you must use the 529 in your state. Not true — plans are portable across states and schools, though tax benefits vary by state.
When you might want more than a 529
While 529 plans should serve as the cornerstone of your education savings strategy, they might not be the only tool you need — especially if you're planning for multiple children or grandchildren, navigating uncertain educational paths or seeking greater control of how and when funds are used.
In these situations, a blended approach can offer valuable flexibility. We often recommend funding 50% to 75% of the expected education cost into a 529, with the remaining balance placed in a taxable brokerage account.
This allows families to benefit from the tax-free growth and estate planning advantages of the 529 while preserving access to funds for nonqualified expenses or alternative education plans — such as study abroad, gap years or post-grad programs.
However, it's important to keep in mind that they could trigger capital gains taxes when funds are withdrawn.
Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.
To further support your goals, the following is a range of other complementary tools that you might consider:
- UGMA/UTMA custodial accounts. Useful for continuing family gifting beyond 529 limits, these accounts eventually transfer control to the beneficiary — typically at age 18 or 21, so they might not be appropriate in every situation.
- Education trusts. For families with complex legacy goals or special needs considerations, trusts provide added control, oversight and structure to ensure funds are used as intended.
- Direct tuition payments. Grandparents can pay a school directly without triggering gift tax limits. This strategy can both reduce their taxable estate and make an immediate, meaningful impact.
Together, these tools help create a more adaptable education funding plan — one that supports your child's or grandchild's ambitions without sacrificing financial control or long-term tax efficiency.
Education planning as a legacy tool
For many affluent families, education planning is about far more than paying tuition — it's about creating a lasting legacy.
A well-structured 529 strategy allows families to pass on wealth with intention, aligning financial gifts with deeply held values such as opportunity, education and self-sufficiency.
Annual contributions to 529 plans serve a dual purpose: They fund a meaningful cause while efficiently moving appreciating assets out of the donor's taxable estate.
For grandparents in particular, this is an opportunity to witness the impact of their wealth during their lifetime — something many of our clients find far more rewarding than a posthumous transfer.
Grandparents can contribute annually to multiple 529 plans — one for each grandchild — as part of a broader multigenerational giving strategy.
This not only spreads wealth in a tax-efficient way but also sets the tone for how future generations view education, financial planning and the family's broader legacy.
By taking advantage of front-loading provisions, donors can superfund each account with up to five years' worth of gifts at once, jump-starting tax-free growth and giving those assets more time to compound.
When paired with other estate planning tools — such as trusts, gifting strategies or direct tuition payments — 529 plans become a cornerstone of an integrated approach to legacy planning.
Best practices for maximizing your 529 plan
If you're ready to build or refine your education funding strategy for your family and loved ones, consider these tips:
Choose low-cost, state-run plans over higher-cost adviser-sold options. State-sponsored plans often come with lower fees, which means more of your money stays invested for growth. Be sure to compare expense ratios and long-term performance.
Research state-specific benefits. Some states offer added perks — such as Pennsylvania's SAGE Scholars program, which provides tuition discounts at participating schools — that can enhance the value of your contributions.
Avoid overfunding. Contribute what fits comfortably within your budget. Prioritize your retirement savings first, then allocate additional funds toward education as your financial picture allows.
Review your plan annually. Your child's needs and your financial goals can shift. Revisit your 529 plan regularly to adjust contributions, update beneficiaries and ensure your investment strategy is still aligned.
Ask smart questions. Talk with your adviser about plan costs, tax implications, financial aid considerations and backup strategies for unused funds. A well-informed plan is a more resilient one.
Ultimately, education planning is more than a financial strategy — it's a structured, purpose-driven way to transfer wealth that reflects your values and strengthens your family's future.
A well-structured 529 plan offers meaningful advantages, but the most effective approach often blends it with other tools tailored to your unique goals.
Done thoughtfully, education planning becomes a powerful way to stay connected to the lives and aspirations of your children and grandchildren — building not just financial security, but a lasting legacy of opportunity.
Related Content
- 529 to Roth IRA: Should You Rollover Unused 529 Funds?
- Best 529 Plans of 2025
- 529 Plans: A Powerful Way to Tackle Rising Education Costs
- Going to College? How to Navigate the Financial Planning
- How to Budget for College Expenses Beyond Tuition
-
A New 2026 Tax Deduction Change for People Over Age 65Tax Changes Adjustments to the extra standard deduction can impact the tax bills of millions of older adults. Here are some new amounts to know for 2026.
-
Family Tax Credits 2026: New IRS Changes That Can Save You MoneyTax Credits While the child tax credit remains the same, other family tax credits are higher for 2026, including the earned income tax credit and other inflation-adjusted amounts. Here's what they're worth now.
-
A 'Fast, Fair and Friendly' Fail: Farmers Irks Customers With Its Handling of a Data BreachFarmers Insurance is facing negative attention and lawsuits because of a three-month delay in notifying 1.1 million policyholders about a data breach. Here's what you can do if you're affected.
-
Serving the HNW Market: How Financial Advisers Can Break Through and Deliver Lasting ValueFinancial advisers have a significant opportunity to serve high-net-worth clients by elevating their capabilities, delivering comprehensive planning, building diverse teams and prioritizing family wealth education.
-
Don't Just Sell, Connect: How Financial Advisers Can Ignite Their Sales GrowthAvoid complacency and embrace small, consistent improvements to optimize your sales process and results.
-
Dow Adds 587 Points as Stocks Bounce: Stock Market TodayThe main indexes rebounded sharply Monday after President Trump took a calmer stance toward China.
-
Retirement Road Trips with Pets: Tips for Traveling with Your Dog or CatHitting the road for a retirement adventure with your pet? Check out these tips to keep your furry friend happy and safe on the journey!
-
Are You a Small Business Owner Buckling Under Economic Pressure? Here's How You Can CopeSignificant emotional and financial challenges, including tariff worries, are piling up on small business leaders. Here's how leaders can develop more healthy coping strategies and systems of support.
-
To Raise Prices or Not to Raise Prices: Tariff Tips for Small BusinessesSmall businesses are making critical decisions. Should they pass on higher costs due to tariffs, or would that only cost them more in lost customers?
-
This Is How Much You'll Have to Pay to Share Streaming ServicesIt now costs more to share streaming services with family members who don't live with the account holder. Here's what Netflix, Amazon, Hulu and Disney+ charge.
