529s and claiming on CSS and FAFSA?!

<p>Hello everyone,
Is it me and my inability to comprehend or is it not clear about how to claim 529 accounts? My sister in law went to a college financial aid guy and paid him to fill out her kid's FAFSA and CSS. He did not claim anywhere in the form that her child is the beneficiary of a modest 529 account set up by the grandparents. I find this extremely hard to believe that it doesn't have to be mentioned anywhere in those forms (my kid has same) so she went back to double check and he told her that they fill these things out all the time and to still keep the question "are yu the beneficiary of any trust" question at ")". How is it possible that the college does not need this information? Is this financial aid guy doing this in a tricky (possible dishonest) way that will come back and haunt her (us)?
Thanks in advance!!!</p>

<p>Is the 529 account actually in a trust (ie. governed by trust documents) or is it simply an account that the grandparents own and student is the beneificiary of? 529 accounts owned by a grandparent are not student/parent assets. If the 529 account is in the student’s own name, it would be reported as a parent asset.</p>

<p>

</p>

<p><a href=“http://studentaid.ed.gov/students/attachments/siteresources/2012-13CTF.pdf[/url]”>http://studentaid.ed.gov/students/attachments/siteresources/2012-13CTF.pdf&lt;/a&gt;&lt;/p&gt;

<p>When a granparent-owned 529 is actually used to pay the student’s expenses, I believe that those payments must be reported as untaxed income to the student on the following year’s FAFSA.</p>

<p>Thank you this is helpful but here is where I get confused. Doesn’t this mean that extremely wealthy people could create these 529s, be the owners, not report that the kids have these funds and basically be qualifying for money that they really aren’t qualified for?</p>

<p>In theory, yes, but it’s not that they’re not qualified for the aid…the same would be true for any student whose granny decides to fund a semester of college and gives the money to the parents to pay the bill. This is because financial aid is based on parent/student finances, not those of wealthy relatives who can change their minds (or beneficiaries) at any time. Unless set up through an irrevocable trust, there is nothing preventing an owner from using the 529 for another purpose so it wouldn’t really be fair to the student to disqualify them for something neither parent nor student can control. If the relative’s 529 contributions paid the student’s expenses then that could affect the student’s EFC the following year.</p>

<p>Thanks again. I guess you are right but it still feels like this kind of loophole can give more privileged families an unfair advantage. If granny gives $45,000 and the students qualifies for $20,000 because of parents income, the kid can now buy a car to take to college as well! But you did clarify and I appreciate it greatly.</p>

<p>So is the proper way to report grandparent owned 529 assets as 'untaxed income paid on your behalf"? As an entering freshman when would this be reported on this years FA forms or next?</p>

<p>No, grandparent owned assets are not reported. The proceeds from their 529 withdrawal would be reported on the next year’s FAFSA as untaxed income if it is given to the student or used to pay the student’s expenses.</p>

<p>I have a similar question, my kid’s
grandfather has a significant 529, but I am almost certain that question PA-120 on CSS asks for 529 accounts held by anyone other than the parents. I thought the grandparent loophole was closed in 2009 and now they have to be reported. Does anyone know for sure?</p>

<p>Grandparent-owned 529s are not reported on FAFSA but they’re reported on Profile.</p>

<p>Just to clarify…my responses only apply to FAFSA!</p>

<p>Thank you!</p>

<p>Profile question PA-120 asks about “parent investments”
A grandparent owned 529 is a controlled by the grandparent not the parent and the grandparent can change beneficiaries or change the account at will so I don’t think you enter this data there
I think you enter the $ paid on the student’s behalf from a 529 under untaxed income for the year is is received?</p>

<p>Actually, grandparent 529 assets may be reported on the Profile, depending on the school and if they have supplemental questions. S2 applied ED to Dartmouth and EA to UChicago this year. The CSS that went to Dartmouth did not have supplemental questions, but the CSS that went to UC had many supplemental questions, including several that delve deeply into the 529’s, including “Enter the total value of assets held in Section 529 college savings plans that were established for the student by someone other than the studen’ts parent” (SQ-5231).</p>

<p>Here’s something that I didn’t know until I went through this process this year - while you can see the basic Profile questions in the “pre-application worksheet”, you won’t see if a school has supplemental questions, or know what they are, until you go to submit the Profile to a specific school. I had mine done for Dartmouth, and then when I went to add UChicago, the additional questions just pop up at the end of the application.</p>

<p>@dukedad- hi, I’m sorry for posting this on the wrong thread…I tried to pm you my question but your settings didn’t allow it. Anyway…I’ve been following a thread about the css profile that you have posted on, and I’d really like a little more info on one of your posts…
Here is a part of the post:</p>

<p>[2. Secondly - for applying to “new” schools you CAN change/edit info on your previously filed Profile and send to the school. When you log into your account, you’ll see an option to “add a new school”. When you get into the form, you’ll see that many of the data fields can be edited, while some will be greyed out and “uneditable” (from the top of my head, some fields like # in household can’t be edited). You will pay a fee to each school that you add.]</p>

<p>It happens that one of my schools has an earlier deadline for the css profile (jan 15), while all the others have deadlines in feb. So my dad has filled out the profile for this college with the most accurate possible info. However, by next month, we might need to make a few changes before submitting it to the other colleges…and I understand that this is possible. But you mentioned that some fields are greyed out and can’t be edited after submission to one college…I’d really like to know which fields these are exactly…do you think you (or anyone else here) could let me know? I’d really appreciate it…
Thank you :)</p>

<p>^^Bluetree, just to confirm, I just went to the college board site and added a school (duke) and opened a new form to see what it would allow. </p>

<p>Here are the questions that I see cannot be changed:
Basic info on parents: PD-100,105,110, 195,200,205
Student data: SD-100,105A, 110A, 115
Family member data: FM-100,105, 115,120,125,126,130,135</p>

<p>Any key financial information on assets and income can be updated. </p>

<p>I hope this helps.</p>

<p>^yes it does, thank you so much! :)</p>

<p>So, I’m still confused . . . maybe I’m slow, but I keep seeing it both ways. It appears that grandparent owned accounts are not reported at all on FAFSA. Are they reported on Profile up front as an asset (if so, what line), or only as student untaxed income when money is taken out?</p>

<p>^^saintfan, it looks like you have questions about how both the value of the 529 grandparent accounts are evaluated (which is an asset question), and how distributions from a a grandparent 529 are evaluated (an income question). Here are answers to your questions:

  1. Grandparent owned 529 accounts are not reported on the FAFSA as assets. However, if you took a distribution from a grandparent owned 529 to pay college expenses, that would be reported as untaxed income for the student on the FAFSA.
  2. Grandparent 529’s MAY BE reportable as assets on the CSS Profile, depending on whether the school you applied to has supplemental questions that ask about them. See my post above where I pointed out UChicago’s supplemental question - “Enter the total value of assets held in Section 529 college savings plans that were established for the student by someone other than the studen’ts parent” (SQ-5231). Grandparent owned 529’s in the students name would be reported here. As with the FAFSA, distributions from a grandparent owned 529 would be reported as untaxed income on the CSS profile.</p>

<p>OK, so unless specifically asked on Profile about Coverdell owned by someone other than the parent the money is not reported as an asset at all? VBALLMOM posted the following answer to my question on a different thread:</p>

<p>“Grandparent-owned Coverdells with the student as beneficiary must be reported on Profile. Like all education savings account, they are reported as a parent asset and assessed at the parent rate, whatever that might be for the particular Profile school (the formulas are rarely transparent). When the money is withdrawn and spent on the student’s college, it is listed as non-taxed “other support”. It’s not considered student income.” </p>

<p>So we have no listed and untaxed income vs parent asset and untaxed “other support”</p>

<p>Both answers could be right and were posted with conviction, so which is it?</p>

<p>saintfan - I was providing info on the evaluation of grandparent 529 plans specifically - not Coverdells. There are some differences. For grandparent 529’s, distributions are considered untaxed income for the beneficiary. I’m not as familiar with Coverdells, but my understanding is that distributions from Coverdell ESAs that are used for qualified educational expenses are NOT counted as parent OR student income and therefore do not reduce FA eligibility.
As I mentioned in my previous post, grandparent owned 529 plans are not included in the parent asset portion of the CSS profile (specifically question PA-120), but they will need to be reported if the specific school asks supplemental questions about reporting the “value of assets held in Section 529 college savings plans that were established for the student by someone other than the studen’ts parent”.</p>