<p>I filed my FAFSA this past Monday and have recently become aware that I inadvertently made an error reporting parental vs. student assets.</p>
<p>My daughter has a UTMA account and at the end of December I worked with an advisor with the company holding the UTMA to transfer the funds into a 529. Initially we were having difficulties getting the information to determine the cost basis of the account to figure out the capital gains. To be safe, we initially filled out paperwork transferring only $6,000 into the 529 (trying to stay under the yearly allowance for student earnings). About a week later we determined the cost basis and filled out new paperwork to move the entirety of the account into the 529. </p>
<p>Thinking that the entire amount was moved to the 529, I filed the FAFSA counting the value of the new 529 under parental assets.</p>
<p>On Tuesday I received a statement from the company which seems to indicate that only $6,000 from the UTMA had been transferred, leaving a little over $17,000 in the UTMA. Essentially, the agent mixed up and submitted the wrong paperwork. I tried all day yesterday to contact the agent and have been trying all this morning with the agent and the company itself with no luck in speaking with someone.</p>
<p>I am very upset right now (compounded by my inability to speak to someone about this) and I don't know what this means as far as the FAFSA - can I correct this and how do I do it? </p>
<p>I fully expect that once it's corrected my EFC will go up because technically at the time of filing this $17,000 was really my daughter's asset and not mine, but it REALLY upsets me that this is because of this agent's mistake.</p>
<p>I'm not exactly sure how to try to fix this - I plan to use the IRS retrieval tool once I file my taxes. Should/can I go in and change the parental/student amounts?</p>
<p>You can fix this all when you update for taxes. Or you can update this part of it once you have sorted things out with your agent. You get to decide.</p>
<p>Run the NPCs at the schools your daughter has applied to using the bigger UTMA figure, and see what things look like. That way you will have a notion of what things could be like when the aid packages arrive.</p>
<p>The UTMA account was your daughter’s money. When it was transferred into a 529 Plan, she should have been listed as the owner, not you (again because it was her money. (I believe that a UTMA can hold “ownership” of a 529 Plan.) Therefore, the 529 (or the UTMA) should have been listed as your daughter’s asset, not yours. I am not sure how this will impact FAFSA, but with my son’s college (CSS/Profile) the college expected the student to contribute 20% of their assets each year for tuition, the parents only contributed 5%.</p>
<p>I realize that the 529 is my daughter’s asset. However, it is my understanding that 529s are counted as parental assets for FAFSA purposes, while UTMAs are not.</p>
<p>Only if the parents are the “owners” of the 529 Plan. If the 529 Plan is owned by the grandparents, then it is neither the parents’, nor the child’s, asset. Most 529 Plans were started by parents and are therefore owned by the parents. Few children have the assets to start a 529 Plan (or continue to fund it). But if for some reason a child had the money to fund a 529 Plan (inheritance, for instance), then he/she would be the owner of the Plan. Generally, 529 Plans are parental assets, but only because generally parents are the ones who set them up.</p>
<p>Put another way: If the OP had decided that rather than convert the UTMA account for her daughter into a 529 Plan, that OP deserved a new car instead, then the OP would have been guilty of a breach of fiduciary duty owed to the daughter and subject to a lawsuit. OTOH, if the OP funded the 529 Plan initially, the OP could decide that the OP doesn’t want to spend the money on college for the daughter. If the money is used for someone else’s eduational expenses there is nothing the daughter could do about it. Even if the OP took out the money to buy a new car, the daughter would have no claim (but the IRS and the state may be owed some taxes or penalties).</p>
<p>Hat, you’re mistaken. Child-owned 529s, also known as custodial 529s or UTMA/529s, are treated as a parent asset and reported as such on FAFSA.</p>
<p>To the OP:</p>
<p>I’m assuming you were transferring the UTMA funds to a UTMA/529. I would go ahead and follow up with the transfer of the remaining UTMA funds to the child-owned 529 and not change FAFSA, if it were me.</p>
<p>vballmom is correct - student owned 529 accounts (but not any other non 529 UTMA accounts) are an exception under FAFSA and are reported as parent assets for dependent students, not student assets. This rule was introduce about 4 or 5 years ago. The FAFSA instructions are quite specific about this.</p>
<p>Ok, I was finally able to speak to the agent’s supervisor (still haven’t been able to speak with the agent himself) after being shuttled around numerous times to the main office, regional office, customer service, etc.</p>
<p>He’s going to look into it and get the rest of the money transferred to the 529. He says that they should be able to transfer the remainder of the funds and back date it to the date of the first transfer, which would be before I filed my FAFSA. Hopefully this is the case.</p>
<p>I feel better now, mostly because I was able to speak to someone to look into this. So frustrating when you need something done and can’t speak to anyone about it.</p>
<p>Thank your agent’s supervisor, I hope it works out for you. Warning to others, these issues can affect EFC’s. D had 529 EFC with Grandmother as custodian, worked out great. I knew she had something for S who is senior this year, assumed it was also 529, found out too late to change it was regular UTMA. It won’t end up a red sports car, but it did significantly impact EFC detrimentally. Lesson: pay more attention to what your very well meaning generous old grandparents do.</p>