Need help on Education Fund for Grandchild 
While Annuities are Tax-Deferred , any withdrawal of the gain inside is taxed as income . So the first portion of the withdrawn funds will be subject to income tax . But your major problem is that it is likely that the mother will not be over 59 1/2 by the time the child goes to college . Annuities are subject to a 10 % penalty tax if the owner accesses it before age 59 1/2 . So on top of the income tax there will most likely be an extra 10 % tax added on . If you want to use an Annuity it is best to have the Grandparents as the Owners . You can do joint ownership between the grandfather/grandmother , or you could just have one as the Owner and the other as the beneficiary . Assuming that the grandparents are still living when the child goes to college , this would eliminate the 10 % penalty . But , you might want to look into a Permanent Life Insurance policy that builds Cash Value . The Cash Value will grow tax-deferred and can be accessed tax-free . If you take it out on the life of the parents , it would provide an extra layer of protection for the childs education . And you can expect 3 % -4 % growth if the policy is designed properly . Feel free to contact me at my website WEBSITELINK if you would like more info . 