<p>Hi. I have a sort of complicated UTMA to 529 situation that maybe someone here knows the answer to. Grandparent has custodial account for 16 year old (HS Junior). For FAFSA/Aid reasons they'd like to have that money in a parent or child owned 529 plan by FAFSA time in Jan. 2014. </p>
<p>Can a grandparent fund a custodial 529 plan with UTMA proceeds and the PARENT as owner on the custodial account (or as custodian) so it couns as parents asset on FAFSA. One potential issue is that my reading of NY State 529 rules says that one cannot change ownership on a 529 plan. This is a restrictive rule but also if you move your NY 529 to a different state's plan they can reclaim the tax breaks you rec'd from the contributions. So... sort of stuck in NY State's plan. I guess the GP could open a 529 in a different state though.... not sure. </p>
<p>Is there any NY state tax deduction for contributions to a 529 that are from an UTMA ??</p>
<p>Thanks for any help on these questions.</p>
<p>The owner of the UTMA is the student (with grandparent as custodian) so any transfer of funds must go to a student-owned UTMA/529. The custodian of the student-owned 529 can then be changed from the grandparent to the parent. You’re not changing ownership of either the UTMA or the UTMA/529; both are owned by the student. The grandparents cannot transfer the UTMA funds to a parent-owned 529.</p>
<p>Contributions to a 529 give a tax credit or deduction based on who the original funds came from. The student would get the tax deduction, if any, since the student owned the original funds.</p>
<p>If NY state 529 tax deduction does not result in any tax savings (the students often do not paid any NYS income tax);</p>
<p>I would suggest you transfer UTMA money to the 529 savings plan of other states. A few other states plans are better than NYS plan. See [Morningstar</a> Names Best 529 College-Savings Plans for 2012](<a href=“http://news.morningstar.com/articlenet/article.aspx?id=570349]Morningstar”>http://news.morningstar.com/articlenet/article.aspx?id=570349)</p>