another 529 question . . .

Paying for College
1

<p>First, I apologize . . . for some reason I am just too dense to understand these accounts. Maybe it's the fact that it's a student asset that's a parent asset that's a student asset . . . AUUGGHH!</p>

<p>Okay, here we go . . .</p>

<p>Assets: Funds currently in a student savings or other investment account don't need to be transferred into a student 529 until the day the CSS (or FAFSA) is filed (let's call it Day X), because the only thing that counts is the snapshot on that day.</p>

<p>Income: Funds in a students savings or investment account prior to Day X will have earned taxable interest income payable to the student. Funds in the student's 529 account after Day X will not earn taxable interest income.</p>

<p>Question #1: Won't it raise a red flag if the student had, say, $1500 in interest income for the year but, as of Day X, has no savings or investment accounts?</p>

<p>Question #2: Is it better to transfer the funds into the student 529 as close to the beginning of the tax year as possible, rather than waiting until Day X, so as to prevent that taxable interest income from accruing?</p>

<p>Question #3: Is the interest that's earned on a student-owned 529 account declared anywhere on FAFSA or the CSS Profile?</p>

2

<p>It is reported to the extent that it is included in the balance of the 529 on the day it is reported.</p>

<p>Yes, to some degree it is beneficial to transfer to 529 at the beginning of the year - this is true whether it is the base year or not.</p>

3

<p>

I transferred some of the funds in my sons’ UTMAs during the base year and had no problem reporting capital gains + dividends with a lower balance in both UTMAs.</p>

<p>

Doesn’t matter, it should depend on where you think the most gains will be (529 tend to be invested very conservatively for older students, a UTMA might be invested in higher risk/return securities).</p>

<p>

No.</p>