Grandparent 529

My mother has a 529 account for my daughter who will be a freshman this fall. I have read that it is better to wait until after my daughter has filed her FAFSA in her Junior year. I did not report the 529 as an asset on her FAFSA but understand any disbursement would be counted as income to the student and will need to be reported on the next FAFSA? I would like to withdraw approximately $3,000/year for her college expenses for the first 3 years and then the balance her final year. She had a part time job over the summer making less than $3,000.

My mother would also like to pay $15,000 spread out over 10 months for her college expenses. Does that get counted as income on the next FAFSA or is it considered a gift? The payment is made directly to the University but I can change that if needed. Trying to minimize the impact to her future financial aid.

Your mom can gift YOU, the parent, the $15k, and that doesn’t count. You would then pay the expenses from that $15k.

$14k is the annual limit

Is “mom” married?

But that’s the grandmother’s tax (if she gives over $14k) and she can go over and the lifetime limits will take over. It also may be over 2 tax years; mother said over 10 months, and that might be the school calendar, not tax calendar.

How much need based aid did daughter get this first year? it is enough to go through all this (although the gmother gifting $15k to the mother is not much sweat on the mother’s part)?

^Right - that’s why I said *annual *limit.

But the annual limit doesn’t mean all that much if the lifetime limits are still available. Probably no tax to anyone at this time, and maybe not ever.

Is grandma married? If so, can’t each spouse give an annual amount?

What if the OP is married? Can Grandma give each spouse an annual amount?

I forget what the rules are.

The grandmother can pay the $15,000 directly to the college without worrying about the annual gift tax exclusion but I think it would be counted on the FAFSA as money paid on behalf of the student.

What if Gma gives $14k to her adult DD, and $1k to her grandDD as gifts?

Excess of $14k from one donee to one donor is significant because then a gift tax return must be filed. OP did not provide information about additional family members.

Gift of $1k to grandkid is probably reportable for FAFSA? That’s the whole point of gifting it to a parent who pays it for the child.

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Also don’t forget that to leave a few thousand in expenses not covered by 529 in order to be able to take the Hope credit (I think that’s it) off your income taxes at the end of the year.

So wonderful that grandma has both the 529 and the wherewithal to contribute 15K (is that a one shot deal or 60K total?)

Mom2- anyone can give 14K per year to any single recipient without triggering the gift tax filing. So Grandma can give to OP, OP’s spouse, anyone else. The gift tax filing itself is not a big deal- the form will take 10 minutes to fill out and file. The issue is whether or not the Grandma has a large enough estate (when that sad day comes) for it to matter, i.e. will the previous gifts come out of the total she will be passing down tax free.

I’m going to assume that the thrifty and generous Grandma is getting her own tax advice and not relying on an anonymous message board…

No, it’s not called the Hope credit.

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Grandma can give to OP, OP’s spouse, anyone else


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OP, are you married? If so, then Gma can gift to each parent.

@madison85 What are the rules about Bday Graduation etc money gifts to the student? Years ago, it was mentioned on CC that those must be reported. Then later on, it seemed like those didn’t need to be reported (maybe unless the amounts were really high).

^Reported for FAFSA or for gift tax purposes?

FAFSA

Mom is not married, I am married. The offer at this time is $15,000/school year or $1500/month over the 10 month payment plan (school year). So for this 2015 calendar year, my mom would be paying $7,500. Next year will be $15,000. The money is currently going to the school directly do I need to have it given to me (up to $14,000) or my daughter and then pay the expenses?

She is assisting us with our EFC which was $37,000. She is consulting with her CPA for how paying the expenses affects her, I am trying to determine the best way to not impact future financial aid and how the 529 and this very generous gift is reported on FAFSA.

She could gift you $14k or less and your husband the balance up to the $15k per calendar year, and then you pay the school directly.

Any other gifting going?