Since my topic is the same I thought I'd post on this thread rather than start a new one.

So my wife and I are the grandparent of a 2 year old and another upcoming child. Is there any tax advantaged alternative to UTMA/UGMA either on contributions or on withdrawals that doesn't restrict the use of the funds by our grandchildren (for e.g. only for education, etc)? Is a Roth IRA an option or is that only viable after the child actually has some earnings?

Congrats on your baby! Assuming he/she's arrived now or any day now!

Concerning the 529, nothing to say a grandparent "should" open the account. The benefit there is that under current rules grandparent 529 assets do not count toward the FAFSA financial aid formula. For a parent-owned 529 with student at beneficiary, 5% of the assets count. So, you would need a substantial 529 balance before that becomes substantial. But if given the choice and you trust grandparents aren't going to change the bene, then might as well let them open and fund the account. Also some chance that both pass away or the rules change in the next 18 years, in which case it's a moot point.

Another option is of course the Trump Account. It's completely inaccessible before the child turns 18. I'm actually not a fan of that aspect, but if your parents are unwilling to budge, this is the only account which fits that mandate.

Frankly, I would like to learn more about why the funds must be inaccessible until adult age. Many successful people started projects, businesses, or other pursuits as teenagers, and I believe children should have the opportunity to succeed or fail by having access to money while they are growing up.

This is why I like an UTMA especially for smaller amounts of money. You have far more flexibility. I like them as a way to introduce your children to managing their own money and making decisions as they grow up. But, they aren't great for financial aid, so be aware of that.

Opening a regular brokerage account or maybe a trust could work. A brokerage account has no legal protections, so it's easy to set up but also easy to mess up. I think for ease of administration and asset protection, the 529 is a great option especially given recent expansion of qualified distributions. Naturally, you can do both which is what we've done along with a small Whole Life policy. It really is amazing these days how a child can own a globally diversified portfolio for practically free.

A Trump account, also known as a 530a account, is another option. All accounts for children born until 2028 (as of right now) will get a $1000 contribution from the Treasury department. You and others can contribute to this. It's not necessarily the most tax efficient, but has more advantages for long term wealth, such as the ability to role it to a Roth IRA after the child receives custody at 18 years old.

It's another option, BiggerPockets Money podcast just did an episode discussing this option among others.

It depends on the amounts involved and whether there's a state tax deduction available for 529 contributions in your parents' case. How much are they thinking?

Another option is to put it in a custodial (UTMA) account, in which case it doesn't really matter who the custodian is (but since you will potentially have to do a tax return for your kid, it might make operational sense if you are the custodian so you automatically have all the right documents).