You'll probably need to search for info specific to your state, or better yet, ask the question directly to the institution through which you set up your 529.
And I found this:
http://www.savingforcollege.com/grandparents/answer.php?grandparent_faq_id=6
The German grandparents will want to talk to their tax consultant as well. They will likely get no tax benefit from such contributions, but perhaps that doesn't matter to them.
I suggest enrolling your son in childhood German courses and a German immersion school if possible, and then have him attend college in Germany while living with his grandparents. College tuition is free, or next to free, over here. Well, it's not exactly "free" - it's funded by taxes.