UTMA/UGMA laws are state specific, so the age of majority will depend on the law of the appropriate state. The UTMA beneficiary is the legal owner of the funds in the account from the second the account is created and funded. The age of majority has nothing to do with whether or not UTMA assets must be reported on FAFSA or any other financial aid form. A 16 year old UTMA beneficiary who is completing FAFSA must report the UTMA assets as his/hers, even if the state’s UTMA age of majority is 21. Those assets are still available to use for the benefit of the beneficiary. The age of majority is mainly used to determine when control of the funds must be turned over from the account custodian to the beneficiary.
So, it looks like my options are leave it in the UTMA and potentially have 20% counted towards EFC if we no longer qualify for Simplified Needs, roll into a 529 and have approximately 15K counted towards student income + 5.6% of the account counting towards EFC, or just sit back and hope they modify to fit the new tax form. I read through all the drafts last night and it looks like I would not be required to fill out any of the add on schedules except Schedule 3 which is for non-refundable credits. Schedule 1 is the biggie and if I don’t do a refundable IRA that would not be required either.
The gains in the UTMA would be $15k? And the parent gets an asset protection allowance before assets are assessed towards EFC.
Yeah, about that. Give or take a couple thousand. The market has been pretty good to that fund the last 10 years.
I’m single, so the asset protection allowance is only a little over 13K and only on MY reported assets. Not my son’s. The student doesn’t get any allowance from what I can see in the formula.
(as an aside, I think it’s really stupid they feel single parents only need half the savings as married)
The asset protection for a single parent is much lower than for married parents. Much less than half.
It is. But I’m sure if they had known it would have resulted in a dollar for dollar reduction in aid they would have done things differently so the gift really WAS additional help.
It is very unlikely it is a dollar for dollar reduction. If someone has an efc of $0, that gets the student a $6k Pell grant. Not many schools cost $6k. If he has $30k in the account, he may not get the $6k, but he can actually afford all of college, not just $6k
I guess I’m not following. If 20% of student assets go toward EFC taking it from 0 to 7K how is it not a dollar for dollar reduction in aid when spread over 4 years? I mean, I guess we could try to spend as much of the 30K Freshman year so it’s not a factor Senior year, but the plan was to divy up the 30K between the 4 years…at about 7K/year.
But the Pell grant is not the only source of aid, and it is not going to be enough aid to pay for college. If it will help you, definitely use it up faster. If using the savinstructions gets you more in aid next year, use it. If paying the tax now and putting it in a 529 helps you, do it now and don’t spread it overy 4 years.
What else is there for state schools besides loans? He might qualify for some scholarships, I know he’s getting one from the high school for sure and I’m hoping for work study too.
Depending on how this pans out we may just opt for going to the local school and living at home.
We qualify for a state grant, but not Pell. My kids got merit from instate schools, take some student loans, and applied for local scholarships.
So, just a follow up on this to anyone that may have the same question. The department of education has released the draft of the 2020-2021 FAFSA and have changed the qualification from 1040A/1040EZ to Schedule 1.
https://www.regulations.gov/document?D=ED-2019-ICCD-0039-0005
Wondering if this might make a good new thread…
The new discussion is here: http://talk.qa.collegeconfidential.com/financial-aid-scholarships/2141712-2020-2021-fafsa.html#latest
Closing thread