September 18, 2025

Explore advanced multigenerational planning strategies for grandparents under SECURE 2.0 and the One Big Beautiful Bill Act (OBBBA). Learn how to use 529 plans, dynasty trusts, SLATs, and charitable strategies to optimize tax, estate, and financial aid outcomes.

Grandparents occupy a unique and powerful position in the family wealth equation. They have the ability to support future generations through education funding, legacy planning, and intergenerational wealth transfer—but only if their planning is done with foresight. With recent legislative changes like SECURE 2.0, the One Big Beautiful Bill Act (OBBBA), and renewed FAFSA rules, 2025 presents rare opportunity: to design structures that protect wealth, reduce tax exposure, and support grandchildren without undermining financial aid or triggering unintended consequences.

Legislative Context: What’s New & Why It Matters

• OBBBA’s Estate & Gift Tax Exemption Boosts: Beginning in 2026, the estate and gift tax exemption increases to $15 million per individual / $30 million per married couple, indexed for inflation. This gives more leeway to fund dynasty trusts, SLATs, or large gifts without immediately triggering federal estate or gift tax.
• Secure 2.0 & 529‑to‑Roth IRA Rollover Rules: Under SECURE 2.0, if a 529 plan is overfunded or no longer needed, it may be possible (under specific conditions) to roll over unused funds into a Roth IRA. That gives grandparents a “fallback” option for excess education savings.
• FAFSA & Financial Aid Revisions: The newest FAFSA simplification removes grandparent‑owned 529 distributions from being treated as “student income,” reducing penalties to aid eligibility. Ownership and timing still matter.

Key Strategies for Grandparent‑Led Planning

1. Smart Use of 529 Plans & Grandparent Contributions

• Front‑load contributions when possible. Early funding gives investment growth more time, and helps satisfy any holding‑period rules tied to rollovers.
• Monitor usage: estimate how much of the 529 will be used, so you don’t overfund. If excess is likely, evaluate whether the rollover to Roth IRA is feasible (consider earned income, contribution thresholds, account age).
• Gifting tactics: use gifts (annual exclusion or five‑year superfunding) to move education funding outside of your estate, while maintaining control via ownership, if needed.

2. Dynasty Trusts & GST‑Exempt Trusts for Long‑Term Wealth Preservation

• Fund GST‑exempt dynasty trusts to pass wealth across multiple generations without incurring generation‐skipping transfer tax. With OBBBA’s raised exemption, there is more “room” to seed these trusts.
• Choose jurisdictions with favorable laws for long‑term trusts (perpetuity periods, tax treatment).
• Build in oversight and flexibility (e.g., trustee powers, trust protector) so the trust can adapt to changing tax law, family circumstances.

3. Spousal Lifetime Access Trusts (SLATs) & Other Advanced Structures

• SLATs allow one spouse to make gifts for the benefit of the other, while removing assets from the estate—but beware the reciprocal trust doctrine: avoid mirroring SLATs in a way that triggers IRS scrutiny.
• Ensure alignment with family goals (access, liquidity, beneficiary protections), and understand potential divorce or remarriage risks.

4. Charitable Giving & Legacy Values

• Use donor‑advised funds (DAFs) or charitable trusts to embed giving into your legacy plan. Giving can reduce taxable estate while supporting causes important to your family.
• Consider matching philanthropy with trust distributions or education funding—this can help unify younger generations around shared values.

5. Financial Aid & Tax Compliance Considerations

• Plan ownership of education savings carefully; when grandparents own the 529, distributions may have less negative aid impact under new FAFSA rules—but private colleges or state aid may still view things differently.
• Keep track of trust income tax brackets and how OBBBA’s changes affect trust taxation. Trustes fill income tax returns for complex and simple trusts; income retained in trust often faces high marginal rates.
• Consult state law: both trust law (perpetuities, trust duration) and state tax (estate/income tax) can materially affect results.

Pulling It Together: Blueprint for a Multigenerational Plan

1. Audit your current estate and gift exposure. Use updated exemption levels under OBBBA to see how much more you can transfer without triggering federal estate or gift tax.
2. Model various scenarios using actual family‑specific numbers: How much to fund 529s? When might you need to roll them over? When to fund dynasty trusts vs SLATs depending on life events.
3. Create governance mechanisms: regular reviews (e.g. every few years or when laws change), open family communications about goals and expectations, trustee selections.
4. Combine strategies: for example, use 529s for education, dynasty and SLAT trusts for asset protection and legacy, charitable giving for values alignment, all while watching financial aid and tax impacts.

Conclusion: Act Now, Plan Well

The legislative landscape in 2025 gives grandparents more tools—and more responsibility—than ever before. With the raised exemptions under OBBBA, the flexibility built into SECURE 2.0, and the reformed financial aid environment, you have a rare window to architect a plan that works deeply for your family across generations.

If you’re ready to assess your multigenerational strategy—or need a trusted partner to help you build (and adjust) a plan aligned with your legacy and values—we invite you to schedule a strategy meeting with Omni 360 Advisors.

This blog was developed with the assistance of AI-based tools for research, drafting and editing support (Chat GPT), and reviewed by OMNI 360 personnel for accuracy and relevance.