Dear Liz: My son lives overseas. He just became a father. He plans to apply for U.S. citizenship for his dependent as an American born abroad. We would like to help save for our new granddaughter’s future. There are 529 accounts here.
Can he set up an account like that if he gets a Social Security number? Are there other options besides a 529 account for children born abroad?
Answer: If your son is a U.S. citizen and the child has a Social Security number or Individual Taxpayer Identification Number (ITIN), then he can open and contribute to a 529 plan benefiting the child.
So can you, and it may be even more beneficial for you to do so. Grandparent-owned 529 accounts, and distributions from those accounts, aren’t counted in federal financial aid calculations.
There are other options for saving for college, including regular savings or investment accounts, but 529s allow money to grow tax-deferred, and withdrawals are tax-free when used for qualifying educational expenses. That’s a significant advantage.
The money can be used at any school eligible to participate in a student aid program administered by the U.S. Department of Education, which includes the vast majority of U.S. colleges and many abroad. In addition, up to $10,000 annually can be used to pay tuition at elementary or secondary public, private or religious schools. Any unused money can be transferred to another family member. Plus, starting in 2024, up to $35,000 can be used to fund a Roth IRA.
Today’s top story: How to navigate the Yahoo data breach settlement. Also in the news: Identity theft and babies, getting grandparents on board with using reward credit cards, and a more realistic way to look at health care costs in retirement.
Today’s top story: How to help your partner’s credit without harming your own. Also in the news: Why Millennials can count on Social Security after all, 3 smart ways to supercharge your travel rewards, and the worst financial mistake a grandparent can make. 