<p>I own a 529 account and my son is the beneficiary. He has a sum of money greater then $14,000 that he wants to take from his checking account and put into "his" 529. So is he gifting money to me? Or is he just moving his own money from one account to another? </p>
<p>First of all check the provisions for your 529 plan since they can have their own rules. In general, just about anyone can contribute to the plan. However, you might want to check out who benefits more with the contibution since some plans have state tax benefits that you might get if your son gave you the money and you contributed it to the account, rather than he directly does so. </p>
<p>However, also understand, and he has to understand the implications of contributing to a 529 that someone else owns even though he is the beneficiary. He can lose the right to that money since the owner of the account can change the beneficiary at any time. I don’t know how the plan would work if anything should happen to you either, if he isn’t specifically named to take over the plan. These are all issues you and he need to discuss and understand. </p>
<p>Some years ago, a friend of mine found out the hard way that the 529 beneficiary can easily be changed. It never occurred to her that her ex would spend the money on classes for himself or others that was put away for their kids. He did. So it is very important that your son and you understand how this works and the risks, advantages of the plan you have. It may be better to have him give you the money to contribute for tax purposes, but then for him to open his own plan and have the contribution amount transferred over Again there are rules that individual plans have that have to be observed. Those need to be carefully studied and understood.</p>
<p>Thank you so much fro your reply CPT. I send you a follow up PM. </p>
<p>If he wants to avoid the $14,000 being counted as his asset for FAFSA, moving it to the 529 will take care of that. The points that cptofthehouse makes about ownership and beneficiary are very important to consider. How old is your son? Over 18? In college now or starting soon?</p>
<p>Jeannemar, he does understand that this is a plan for him to move his money for FAFSA. Does the CCS profile also count a parent owned 529 for the benefit of a child as a parents asset? He will be 18 when he moves the money. </p>
<p><a href=“Your Guide for College Financial Aid - Finaid”>Your Guide for College Financial Aid - Finaid;
I think it will really be up to the college how they handle that. You can contact the college FA offices to ask. From what I’ve read here those offices are very open about what assets are counted.</p>
<p>If your state has a tax deduction for 529 contributions, it might make sense for your son to gift the money to you and for you to then make the contribution to get the benefit of the tax break (assuming your son would not be able to benefit from any such tax break).</p>
<p>If your state has no 529 contribution tax break, or has one that your son could take advantage of, it might make sense for him to open a new 529 account with him as the owner and beneficiary and deposit the money in the new account. Under FAFSA, this student-owned account would be considered a parental asset. My understanding is that how 529 accounts are looked at when reported on CSS/Profile (student-owned or parent-owned) depends on school-specific formulas. I think you would have to ask each FA office how they do it.</p>
<p>FAFSA does not consider 529 assets even owned by the student as student assets and calculates them using their 5.6% formula which is how parents’ assets are assessed after a protection allowance. That is a big difference from the 20% with no allowance that would go right towards the student EFC if the student kept the money as an asset in most other accounts. </p>
<p>That does NOT mean all schools look at the 529s that way. Certainly not with their own money and I know a number of PROFILE schools that use different formulas for student assets, consider even 401 K funds at times. That’s why each school has to be specifically approached and asked how 529s are handled. </p>
<p>cpt, thank you so much I would never have known this. Thank you all who pointed me in the right direction. </p>
<p>So you have a number of issues to examine here. 1) the specific rules governing the 529, the one you have now and others that your son could open for himself 2) Tax implications as to who makes the 529 contributions 3) How schools would look at 529s when putting together financial aid packages and whether they would look at student 529s differently from the parent’s. FAFSA is straightforward in this regard, but schools can do what they want with their own money </p>