Custodial 529 and age of majority question

Paying for College
1

<p>Hi-</p>

<p>I will be filing the FAFSA for the first time next month. My daughter has several UTMA accounts for which I am custodian. I am looking to move some of the UTMAs (all depending on how much the capital gains would be) into a custodial 529 before filing. My understanding is that leaving the assets in the UTMAs subjects the value to the 20% student assessment and if the funds are in a custodial 529, it is subject to the 5.6% parent assessment.</p>

<p>My question is regarding what happens when my daughter reaches the age of majority. When she turns 18 will the amount in the 529 be counted as a student asset (at the 20% rate) when I file next year's FAFSA (for the 2014/2015 school year)? </p>

<p>Thanks for any help you can provide.</p>

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<p>Your question:

</p>

<p>No. 529 always be counted as parental asset, if the student is a dependent.

See [Does</a> a 529 Plan Affect Financial Aid?](<a href=“How do 529 plans Affect Financial Aid? - Savingforcollege.com”>How do 529 plans Affect Financial Aid? - Savingforcollege.com)</p>

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<p>For financial aid, a student is considered a dependent until they reach the age of 24 (or in some other less usual circumstances). While the student is a dependent student for FA purposes, a custodial 529 and a UGMA 529 are reported as parent assets on FAFSA. (the age of majority is not very relevant in the financial aid world).</p>

4

<p>Thanks so much for the quick information - it really helps because I was just on the phone with the agent handling one of the UTMA accounts (trying to find out how much capital gains there would be if I rolled the funds into a 529) and he was confusing me - possibly because he was slightly confused himself (he did say he wasn’t completely up to date on how the FAFSA looked at student vs. parent assets).</p>

<p>He brought up the age of majority issue and seemed to think that once she turned 18 any funds in the 529 would be counted as at the 20% rate.</p>

<p>I’m already stressed out and kicking myself because I failed to pay attention to how assets (depending on what kind of account they are in) were handled prior to this year. Frankly, I had pretty much ignored the UTMA accounts that my grandfather gave to my daughter a long time ago. I figured I wouldn’t do anything with them and when she got older she could use them to help fund a down payment on a house or something. I also didn’t realize how the value of the accounts had grown. Aargh.</p>

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<p>Not a terrible problem to have!</p>

<p>As has been pointed out, all 529s whether owned by the parent or the student are considered parent assets for purposes of FAFSA. It has nothing to do with the age of majority in your state.</p>

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<p>

What he no doubt meant to say was “I have absolutely no clue about FAFSA”</p>

<p>Lots of financial planner type people have no clue about how financial aid works. Thank goodness for CC!</p>

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<p>So absolutely true - this forum has been a lifesaver as far as obtaining information regarding the FAFSA and how the EFC is calculated. </p>

<p>I may not be happy with the answers I’m getting (completely my fault for not thinking about the FAFSA and how EFC is calculated until this year) but at least I’m better informed going into next month. </p>

<p>At any rate, I may be only able to move a portion of the UTMA assets into a 529, but at least part of it is better than all of it being calculated at 20%.</p>