529 for grandkids

Is it better to set up 529 for our grandkids or give the money to a daughter to invest with her funds, realizing we are not getting a state deduction in MD.

posted

The growth in the 529 is still tax-free when withdrawn if used for qualifying education expenses, whereas the daughter (or grandchild, if you use a UGTMA) will probably pay 15% long term capital gains when they cash out, and may also pay yearly tax on any dividends.