There’s a special kind of joy that comes with being a grandparent. You get to spoil them, cheer them on, and watch them grow into their own little people. But here’s a gift that lasts far longer than any toy or sweet treat: helping pay for their education.
As you know, college isn’t cheap. Tuition keeps climbing every single year. Just thinking about the debt our grandchildren will face before they start their careers is something we all want to prevent. The good news is there’s a smart, flexible, tax-friendly way to do exactly that. It’s called the NY 529 Direct Plan, and grandparents all over New York are jumping on board.
“One of the tactics to reduce a grandparent’s taxable estate can be achieved by setting up a NY 529 account,” said Vincent J. Russo, Managing Partner at the Russo Law Group in Garden City, Islandia, and Long Beach. The Russo Law Group is a signature elder law, estate planning, and special needs law firm.
What Is the NYS 529 College Fund Program?
A 529 plan is a state-sponsored savings account built specifically to help families set aside money for education. It gets its name from Section 529 of the Internal Revenue Code.
New York’s version is called the NY 529 Direct Plan. It’s overseen by the New York State Comptroller’s office and managed by Vanguard, one of the world’s largest and most trusted investment companies. So your money is in good hands.
Here’s what I love most: there’s no minimum contribution. You can start with any amount—five dollars, fifty dollars, whatever fits your budget. You can set it up online at nysaves.org, and contribute through payroll deduction, a bank transfer, or even by mailing a good old-fashioned check.
Why Are Grandparents Opening 529 Accounts?
More and more grandparents are stepping up as account owners, and it’s easy to see why. For many of us, it comes down to the heart. We want to leave a meaningful legacy, something that truly shapes our grandchildren’s lives. Watching them walk across a graduation stage, debt-free and ready to chase their dreams?
That’s the kind of memory money can’t buy.
“We’re seeing more grandparents than ever use 529 plans as a cornerstone of their legacy planning,” says Mr. Russo. “It’s a rare opportunity to do something deeply personal for your grandchildren while making a smart financial decision for your own estate. That combination is hard to beat.”
But there’s a practical side too. Grandparents are often in a stable financial position, with savings they’d love to put to good use. A 529 plan lets you turn that into something powerful—a growing fund that gives your grandkids a real head start. It blends love and smart money management, which is a beautiful combination.
How Does It Benefit Grandparents?
This is where things get really interesting, because a 529 plan isn’t just good for your grandchild—it can be great for you too.
- You reduce your taxable estate. Contributions to a 529 are considered completed gifts, which means they move money out of your estate. For grandparents considering estate planning, that’s a meaningful way to reduce potential estate taxes while doing something wonderful for the next generation.
- You stay in control. Here’s the part that surprises people. Even though the money is for your grandchild, you remain the account owner. You decide how it’s invested and when it’s used. If life takes an unexpected turn, you stay in the driver’s seat.
“What many people don’t realize is that a 529 plan lets you give a substantial gift while still keeping control of the assets,” Russo explains. “You can reduce your taxable estate and support your grandchild’s future, all without giving up your say over how and when the money is used. For thoughtful estate planning, that’s incredibly valuable.”
You can give generously. You can contribute up to $19,000 per year ($38,000 if you’re married and filing jointly) without triggering federal gift taxes. Want to make a bigger splash? You can front-load a single contribution of up to $95,000 ($190,000 jointly) and treat it as if it were spread over five years—a fantastic option if you’ve recently sold a home or come into a windfall.
A quick note: if the donor doesn’t survive that five-year period, a portion may revert back to the taxable estate. It’s worth chatting with your tax advisor about the details.
How Can the Funds Be Used?
One of the best things about a 529 plan is its flexibility. This isn’t a narrow, college-only account. The money can cover a wide range of education paths, including:
- Tuition and fees at over 6,000 eligible two- and four-year colleges
- Books, supplies, computers, and internet access
- Room and board during the school term
- Trade and technical schools
- Graduate and postgraduate programs
- Registered apprenticeship programs
- Student loan repayment—principal or interest on qualified education loans (up to $10,000)
- Roth IRA rollovers—if your grandchild doesn’t end up needing all the money, up to $35,000 can be rolled into a Roth IRA for them (certain conditions apply)
So whether your grandchild becomes a doctor, an electrician, or a small business owner, this fund can help them get there.
The Tax Benefits
Now, let’s talk about everyone’s favorite topic—saving on taxes. The NY 529 Direct Plan stacks up some genuinely impressive advantages.
- Tax-deferred growth. Any growth on your contributions isn’t taxed at the federal or state level while it sits in the account. That means your money has more room to grow over time through the magic of compounding.
- A New York State income tax deduction. New York taxpayers can deduct up to $5,000 a year, or $10,000 if married and filing jointly. That’s a yearly reward just for doing something good.
- Tax-free withdrawals. When the money is used for qualified education expenses, you won’t pay federal or New York State income taxes on it. The growth comes out tax-free.
- The federal gift tax incentive. As we covered above, you can give generously—up to $19,000 a year ($38,000 jointly), or that lump sum of $95,000 ($190,000 jointly) treated over five years—without federal gift taxes. Just keep in mind that withdrawals used for non-qualified expenses (like a wedding or car purchase) may be subject to income tax and a 10% federal penalty on the earnings. Always check with your tax advisor before making big moves.
Are There Similar Programs Across the Country?
Every state except for Wyoming offers at least one 529 plan, so no matter where you live, there’s likely an option close to home. Most states also offer their own tax deductions or credits for residents who contribute, much like New York does.
Here’s a fun fact, though: you don’t have to live in New York to use the NY 529 Direct Plan. Savers across the country can take advantage of its low costs and flexible features, with no extra fees for nonresidents. And contributions may even qualify you for tax benefits in your own state—so it’s worth comparing your home-state plan with New York’s before you decide.
Ready to Give a Gift That Truly Lasts?
Of all the things we can give our grandchildren, the gift of education stands among the most powerful. It opens doors, eases burdens, and sets them up for a brighter future. The NY 529 Direct Plan makes it simple, flexible, and rewarding—for them and for you.
“At the end of the day, this is about family,” Russo adds. “Helping a grandchild graduate without the weight of debt is one of the most lasting gifts you can give—and with the right plan in place, you can do it wisely and with confidence.”
So, if your heart is nudging you to do something meaningful and you want to save on taxes, why wait? Visit nysaves.org to learn more and open an account, or call 877-NYSAVES (877-697-2837) or call the Russo Law Group to see if this is right for you. Every family is different, and a little guidance goes a long way.
Here’s to your grandkids’ bright futures—and to you, for making them possible.