I’ve done some searching but haven’t found absolute consensus on how to handle grandparent-owned 529 assets that name your child as beneficiary. My daughter heads off to school next fall.
Going through the CSS profile this week, there’s a question that asks relatively vague questions: what does the student expect parents to contribute? What does the student expect other extended family members (e.g., grandparents) to contribute. I’ve seen various suggestions on how to respond to these questions, but I’m particularly interested in the second inquiry pertaining to grandparent contributions.
I don’t recall being asked explicitly to list non-student or non-parent owned assets anywhere else in the profile. It seems they only ask about this in the context of expected contributions.
My MIL has been contributing to 529s for both of my kids and has ~1/2 year of tuition, room and board saved for both. I’d rather not state any expectation of her contribution; after all, even though my daughter is the named beneficiary today that could change in the future - it’s my MIL’s money, not mine (I don’t expect her to do that, but it is technically possible). There’s also the realistic possibility that she could have set this up and contributed to it without my knowledge (although not the case). She’s under no obligation to disclose this to my wife and me.
Can I just leave this expectation at zero, and then use the funds in the latter years of college once financial aid will not be impacted by the untaxed income received by my daughter?
It does not appear that the school she’s applying ED to has any supplemental questions about this, so it’s only a matter of how to state expected contribution from grandma in the standard RSS profile.
Shared insights or recent experiences with this topic would be greatly appreciated!
I think the Profile question about expected payments from grandparents is stupid, especially as it relates to contributions for college expenses from a grandparent-owned 529 account. You are right; a grandparent could establish an account with a grandchild as the beneficiary and not tell anyone, so in that case there is no way the account could be reported on the Profile form, or the grandparent-owner could change the beneficiary at any time. If I was in your position, even if I knew that a grandparent had established a 529 account, I would answer the question about expected contributions from a grandparent as $0. I am pretty conservative financially, so I never “expect” to receive any funds until it’s pretty much a sure thing, whether it’s a gift from a grandparent or an inheritance, etc. Don’t count your chickens…
@thumper1 I believe they count as untaxed income for the student, thus the recommendation to use these funds in Jr/Sr year at which point they will no longer affect potential future financial aid.
I believe that rule changed this past year and, at least for the FAFSA, there’s no longer a question that asks what grandparents (or other parties) are contributing to the student’s education. There used to be a question about untaxed income which is where the grandparents 529 payments would be recorded.
Edited: I posted a correction below. This change was postponed.
For Profile right now, yes, and it will be interesting to see if CSS (College Board) follows FAFSA in eliminating the reporting of student “untaxed income” which comes in the form of a grandparent gift. If not, the Jr/Sr year strategy is smart.
My comment only focused on student untaxed income, in the form of a grandparent gift, after FAFSA changes are in place. I haven’t reviewed when this will happen or if parent untaxed income or other student untaxed income will see the same change.