<p>Asking this question for a friend, since I know you folks will have ideas or advice. I searched and couldn't find another thread that answered this - if there already is one, please point me there. Thanks!</p>
<p>Friend's son is in sixth grade. Son is likely to be eligible for some need-based financial aid. (Single-parent household with a mortgage). </p>
<p>There is a custodial account in son's name (about $25,000 compensation for an accident when he was little). When he turns 18, he will be able to access the funds in the custodial account.</p>
<p>When friend does the son's college freshman year FAFSA when the son is a senior in high school, son will be 17; when he starts college, he will be 17; he won't have access to the money yet. Does the money count as an asset in his name in such a way that it would make the family's expected contribution to his financial aid higher and his need lower? (It doesn't seem fair that it would, since no one can get at the money.)</p>
<p>Mid fall of freshman year, he'll turn 18. I think that it might be good for him to use some of the custodial account money then for expenses related to school in some way (car to drive to college? new computer for college?) before the family does the son's college sophomore year FAFSA. Is that correct? and is that okay?</p>
<p>I keep reading about moving money to a 529. Is there any benefit to moving the money from "in son's name in a custodial account" to "in son's name in a 529 account"? I think this can't be done until he turns 18? If - when son is 18 -they spend some of the money on a computer or car or whatever, is there an advantage to trying to move the rest over to a 529?</p>
<p>This son is the youngest child in the family, if that matters. Thank you for any suggestions. I will pass them on to my friend, who is starting to think about college for her kids but has no one in high school yet - too early to get addicted to college confidential. Thanks again!</p>
<p>I think it does. Even though he can’t access the money until he is 18 the custodian could, I’m not sure that it is relevant exactly when he turns 18. I think he has to list it as an asset when he applies to college as a 17 year old. I would appreciate it if someone would correct me if I’m wrong.</p>
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<p>He can use the money for anything that he wants.</p>
<p>I think it depends on whether the restriction is voluntary or involuntary. If the account was set up by a court order that says it cannot be accessed then it may not have to be reported. If there is no court order then it is reportable even if it is not possible to access the funds.</p>
<p>The benefit of changing into a 529 account is that it is then reported as a parent asset (even if it is a student owned 529) rather than a student asset. 5.6% impact on the EFC rather than 20%. Of course there are then restrictions on how the money can be used.</p>
<p>If the parent income is low enough (<$50k), and the parent meets one of the other eligibility criteria, then they might be eligible for simplified needs where the asset would be disregarded.</p>
<p>If the student is only in 6th grade then it is possible all these rules may be completely different by then.</p>
<p>Not true, money in a custodial account such as a UTMA can be moved to a student-owned 529 at any age. There’s no need to wait until the beneficiary has turned 18.</p>
<p>The foll refers to the CSS Profile. My suggesion would be, when the time is appropriate, run through the Fafsa and Profile worksheets to see what then applies.</p>
<p>Student’s Assets (SA)</p>
<p>SA-110B
Enter how much your investments are worth today. Include the total value of all of your trust accounts, regardless of whether any of the income or principal is currently available…</p>
<p>SA-170A
Enter the total value of all of your (and your spouse’s, if married) trust accounts, regardless of whether any of the income or principal is currently available.</p>