Custodial account or 529 plan?

I want to set aside some college money for my newly-born grandson. Assuming he has a custodial account (with my daughter as the custodian) and my daughter has opened a 529 account for him, which should I fund? Who "owns" the 529 account?

I know gifts to the custodial account are considered gifts to the grandson. Are gifts to the 529 account considered gifts to my daughter for gift-tax purposes? I believe she could withdraw funds at anytime, subject to a possible penalty and/or tax. I'm not concerned that she may do this. I'm only concerned about the tax implications.

Since 529 plans only accept cash, some of my gifts will consist of appreciated stock which would be gifted to the custodial account. My grandson could then realize up to $2100 in capital gain each year without paying any CG tax. Could he then move the proceeds to the 529 plan?

Realize that this is not just a tax question, but also has additional effects. For example, although you might not be concerned about your daughter's handling of money, you would have fewer guarantees about about your grandson when he comes of age and would get control of the custodial account money. Also, financial aid is impacted more by custodial money than 529 plan money. IIRC, if you were to set up a (separate) 529 plan for your grandson that would not even appear in the FAFSA application.

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Remember that there will be Kiddy tax implications that could limit the tax-free part of the income, although at the moment that threshold is $2000 of unearned income. It would also include any interest or dividends that come from a custodial account, although this would seem a way to reduce the tax rate on at least some of the capital gains.

I would expect that this would have to be a custodial 529 plan separate from any such plan owned by his mother. It looks like there is some other information about that here:

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