Almost all of the colleges my child is applying to require the CSS profile. Does it make sense to recharacterize her UGTMA account to a 529?
It wouldn’t be a “recharacterization,” and it depends. You would be liquidating the assets held in the UTMA/UGMA account and using the proceeds to open a student-owned 529, so you must factor in any capital gains taxes that might be incurred. Financially, from a need-based aid perspective with Profile, it depends on how a particular school using Profile chooses to treat a student-owned 529 account when calculating an institutional EFC. Some Profile schools will treat a student-owned 529 account as a parent asset (good), and some Profile schools will treat a student-owned 529 account as a student asset, just like an ordinary UTMA/UGMA account (not as good). It generally takes a call or email to the school’s financial aid office to find out what the school’s policy is in regard to student-owned 529 accounts.
The answer with FAFSA is much easier. A student UTMA/UGMA account is reported as a student asset. A student-owned 529 account is reported as a parent asset (assuming the reporting of parent financial information is otherwise required).
Thanks, I guess I have to make the calls.
Run the Net Price Calculators at the websites of the institutions that are on your kid’s list both ways. You might find that it doesn’t matter at all if you move the money.
Right. You need to look at your full financial picture before doing financial gymnastics. Is your income sufficiently high that your student won’t qualify for need based aid anyway? Do his colleges guarantee to meet full need for all accepted students?
How much is in this account? You don’t have to tell us, but a smaller amount would not increase your family contribution in the same way as a larger amount. Right?