<p>Some older relatives of ours have expressed some interest in putting money into 529 accounts for D1 and D2 as a way of reducing said relatives' taxes. I know that CC wisdom is to not have the money be in the student's name, in order to minimize the amount of money exposed to FAFSA and PROFILE. However, even without considering student assets, our EFC is going to be high enough to rule out need-based aid (I know, this is a good thing--I am properly thankful). Both D1 (9th grade) and D2 already have UGMA accounts (long story) which will cover undergrad costs at our in-state university system. I figure that it's therefore not going to make any difference, for undergrad financial aid purposes, if the kids have more money in their names. But what about for grad school? My understanding is that for professional schools, at least, parental income could be a consideration, at least up to some age. Are there other non-529 options we should/could consider? I would say right now that grad school soon after undergrad will be more likely for D1 than D2, but I wouldn't want to bet on it.</p>
<p>While 529s are for the student’s use, they are usually in the parents name and therefore count as the parent’s assets. They can also be in the grandparents names and will not be assessed by FAFSA, but they might by Profile schools.</p>
<p>I’m not sure how FA for grad/professional schools works.</p>
<p>My mother has a 529 account for my daughter, in my daughter’s name, but not as her account. While we did have to indicate it on the Profile, and not on the FAFSA, it doesn’t seem to have had any impact on the financial aid. It definitely would have had an impact if I had owned it or, even more so, if my daughter had owned it. Also, we are not going to tap into the 529 if we can help it, until maybe junior year (she just finished her first year). We will use it for senior year, for sure. So far, we are able to pay tuition without using it. I am really hoping that my mother will be able to give it to another, younger, grandchild, or, even (I know there would be penalties) take it back and have it for herself. It seems that we may be able to do that.</p>
<p>If they are putting money in the account to reduce their taxes, then the 529 should be owned by them, with the students as the beneficiaries. The funds are then assessed as the owner’s, not the student’s, and in this case wouldn’t be assessed at all by FAFSA.</p>
<p>The kid’s investment for college and beyond are in UGMA silos. The UGMAs will consist of LT gains, ST gains, Dividends, Interest, and Capital LOSSES. Each will be taxed . You manage the UGMA for taxes, gains, and losses for current and future use as college, car, home, retirement and perhaps marriage. Assets can be moved fairly freely,</p>
<p>For 529s, they can be managed for maximum gain and minimal losses; Because, there is no taxes on gain and no tax losses for capital losses. Asset reallocation is limited. </p>
<p>Let relatives do the 529, since they will desire it, get the most tax benefit, and it is ultimately their money. Let them choose the investment that will get the 529 best perceived returns.; While you manage the UGMA’s for tax and
gains.</p>
<p>Coverdells may work in place of 529 if the donator is within the income limits and if the money could possibly be used prior to college but for educational purposes-HS sponsored band trip. There is more flexibility in Coverdells than 529s but Coverdells may incur higher fees.</p>
<p>This is exactly what we did, and I think it would work for most people.
</p>
<p>529s are a very good way for older people to avoid estate taxes if they want to leave $$$ to their grandchildren anyway. I believe a couple can put $120,000 into a 529 for a younger relative if no other annual gifts for five years and a single person can put $60,000 in. Some states give excellent tax breaks for 529 donations.</p>
<p>I guess a downside might be that the older person does control the account so if the older person no longer likes your kid or the older person develops dementia and can’t manage funds there could be problems.</p>