<p>Both of my children have the equivalent of about one year's tuition in grandparent owed 529 plans. When disbursements are taken from these accounts, how will these monies be viewed in relation to any financial aid we might qualify for. I have been told to use these accounts for their final year of school, so as not to decrease our financial aid award</p>
<p>Any experience out there with this?</p>
<p>Treatment of 529's changed this year.</p>
<p>Good basic info is here:</p>
<p>and an update about this years' changes is here:</p>
<p>Thanks sblake7!!
I've been searching the web but was unable to find exactly what I was looking for. The second article states what I needed to hear: "In addition, tax-free withdrawals from 529s are not picked up as income for financial aid purposes, Hurley says." :)</p>
<p>you really need to cruise over to Hurley's website. If gp's own the 529, the monies are not counted for either the parents or students FA eligibility. The reasoning is b/c the gp can reassign the monies to someone else at anytime and the tax benefits belong to the owner not the beneficiary. </p>
<p>disclaimer: I may be wrong.</p>
<p>I was at a school event and overheard two parents discussing that they had funded their 529's via the grandparents, and that this would not be counted toward parent or student's EFC. They were so "proud" of having the money they would need, but not having it "show" up when filling out FAFSA and the like. It almost sounded as if the parents had somehow given the money to the grandparents, who in turn used it to set up the 529's. "It will be there, but only if we need it, depending upon how much FA we acctually get." I am also curious about grandparent monies.</p>
<p>If the money is in the grandparents names then it will not show up on the FAFSA and perhaps not on the CSS Profile either. Thus, these funds are avoid the radar of financial aid analysis, unless there is a question on these forms regarding gifts from relatives towards tuition.</p>
<p>Generous grandparent funding 529s is a wonderful thing. Parents funding 529 through grandparents starts to smell like hiding assets (so financial aid office can't see it) or laundering.<br>
Two things for a parent to remember if considering this route. 1) Parent loses control over money given to grandparent. This would usually be a small concern, but remember that grandparent could decide not to put the money into a 529 at all or that cousin Susie is more deserving or needy, or gp could die and account could be swallowed up by estate. 2) The transfer of money from parents to gp to fund the account could be subject to gift tax. (The money you use to fund an account you own is exempt up to a certain amount, but this wouldn't necessarily be true when you give money for an account owned by someone else.) For a substantial transfer, the tax could easily wipe any benefit from more financial aid.<br>
Even without the potential control and tax issues, the benefit could be negligible. A $50,000 reduction in parent assets could mean about $3000 more financial aid (is the rule of thumb for parent assets going to EFC 6%?). That's great if the additional aid is grant money, but not so great if it is loans.</p>
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Parents funding 529 through grandparents starts to smell like hiding assets (so financial aid office can't see it) or laundering.
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My thoughts exactly. But I guess it is being done.</p>
<p>Generally, any funds in the Student's name will severely impact financial aid-- that's why the general advice is to put college savings in the parent's name, not the student's. And since parents have an asset protection allowance (generally around 45K), most families will have little or no adverse impact from the parent's contribution to the EFC due to assets.</p>
<p>But things changed regarding treatment of 529's this year-- and as it's currently being intrepreted, 529's in the student's name don't count toward the EFC at all. So in this narrow case, saving in the student's name can be better than saving in the parent's.</p>
<p>When you withdraw funds from a GP owned 529 to pay tuition say for this school year, do you have to report those monies on next year's financial aid application</p>
<p>One more question---I know the FAFSA does not require reporting of 529 plans that have the student listed as the beneficiary, but what about the CSS/Profile</p>