No power of attorney that I am aware of.
It wasn’t our secret and we are more interested in how to solve our own problem than lessons right now.
An UGMA is a type of trust. A trust – or really any type of asset – that you do not know about at the time you complete the forms is not expected to be reported. It is clear in the FAFSA instructions.
And seriously, it’s $2500, not $250,000. If you are asked, hypothetically, to sign an affidavit sometime in the future (unlikely) – “Do you know now or have you ever known about the existence of an UGMA under the custody of the student’s grandparents?” – you’ll honestly say you did not know then but you know now, and you can add the $2500 to the applications. if so required. That’s the worst that can happen. But that won’t happen.
I don’t have enough data to feel comfortable giving you any advice, and besides, you shouldn’t take any kind of financial advice from an anonymous poster on an internet forum.
Yes, I think you are worrying excessively. If this was $250,000, that would be one thing, but in the financial aid scheme of things, $2,500 in student assets that you didn’t know existed when the forms were completed is not an earth shattering situation.
Thank you! I appreciate the reality check! I think that’s what I was looking for.
In the meantime, another acceptance came in just 3 minutes ago, so time to celebrate and pause the worry!
That’s unfortunate. Anyone with a young adult child overseas should at least consider talking with the child about the benefits of having a POA in place, if only as a hedge against bad things happening.
Yes, I understand that the secret was not yours. My comment was meant for anyone reading the thread. Your daughter and her parents have been negatively impacted by the manner in which the grandparents have gone about this. Hopefully the $2,500 gift can make up in some way for most or all of that.
Congratulations to your daughter, and enjoy the newest celebration.
You said, as I did, that you do not have to report the asset on the css form prior to age of majority. And to let the school know about this account and see what they say. How is this wrong in so many ways? That’s all I said in that regard.
The income tax implications may be off, it’s been a while dealing with ugma/utma accounts. However , If the minor is responsible for reporting from the outset, does the OP now require amended tax returns as well? If I’m following you.
I thought the income accrued to the parent at their rate up to a certain age but the parents aren’t the custodians. How would this work. It’s been awhile since the 529 boom that this has been common. So my apologies.
And you don’t think that claiming the asset, using it for something productive wouldn’t be useful for future filings. It wouldn’t exist year two etc the way I see it.
My suggestion was to let the school know and see what they have to say.
No, I most certainly did not say this.
I also didn’t say this.
It depends on all the circumstances, but based on the relatively low account balance, it’s unlikely that the amount of any taxable earnings by itself in any one year exceeds the amount required for the daughter to file a tax return.
I don’t know what the tax law on UGMA/UTMA accounts was the last time you had to deal with this, but dispensing tax information without a working knowledge of the current IRS code is a really bad idea.
You certainly did
“The UGMA account balances for the younger kids should not be reported on your daughter’s FAFSA and Profile; that money is not legally her asset. However, when the boys are filling out their own financial aid forms in the future, any money in a UGMA/UTMA account of which they are a beneficiary needs to be reported.”
How this inconsistent with what I said. I’m not trying to debate here. But just trying to be very, very clear
I only said no to question two. Exactly what you stated. And to report the current child’s account to the school and discuss and perhaps going into future use it productively now.
I readily admitted being rusty on the income tax side of things. It was an error and only recollection on that side which is arguably not the question being asked in any event.
But you didn’t answer an important question. If someone creates a ugma or utma and doesn’t tell you. Are you then responsible for amending tax returns once you become aware. In this instance it is perhaps deminimus but asking in general because that’s good to know.
OP apparently has three children, and she has just learned that each child (the 18 year old daughter and the “younger kids” who are the daughter’s siblings) each have a UGMA account that was established by grandparents. OP asked if the UGMA accounts belonging to the siblings, the “younger kids,” need to be reported on the 18 year old daughter’s FAFSA and Profile. My answer is NO, the accounts belonging to the “younger kid” siblings are not reported on the 18 year old daughter’s financial aid forms. The UGMA account belonging to the 18 year old daughter should have been reported on the daughter’s FAFSA and Profile, if the account’s existence was known at the time the financial aid forms were completed. Do you understand this now?
I did address this concern. See post #28 above.
This probably happens a lot. Relatives open such accts and don’t mention them. If people were getting into big trouble, we’d likely have heard about it by now.
First of all, I’m not sure how UGMA accounts work, but would it matter?
What was the FAFSA EFC?
Does the school meet full need?
For CSS profile there is a comments section I think, maybe you could mention that the age at which she can have access to the money is 21.
There is a comment section at the end of Profile, but the fact that the student has some of his/her assets in a UGMA or UTMA shouldn’t make any difference. Even FAFSA makes no distinction between student money in a regular savings account and money in a UGMA/UTMA account of which the student is a beneficiary.
Money in a child’s name that the child will not have access to until a later time for VOLUNTARY reasons is supposed to be reported. A voluntary reason is if a grandparent voluntarily designates the age of 21 or 35 or 40 as the age at which the child can have the funds. An involuntary reason would be that a court order has frozen the funds.
HOWEVER, in this case, the parents did not know about the trust (it is a form of a simple trust). Therefore, there was no need to report it.
I guess I would amend the FAFSA and just include the $2500 student asset.
The grandparents thought they were doing something very helpful for their grandkids. Consider it a nice thing and just add it as a student asset. It will increase your FAFSA EFC by about $500 this year which can be used to pay the college bill out of the account.
Then…spend it down before filing next year. Use it to pay this year’s tuition and costs.
Yes, that’s why I asked what the FAFSA EFC was without the UGMA, because the $500 increase by reporting it might not even matter.
@BelknapPoint I really don’t know anything about UGMA accounts…but since this money now is the kid’s, would it be possible for it to be taken out of the UGMA and put into a 529 without penalty?
I know this will be a challenge with this kid out of the country…but maybe all the paperwork can be done online.
Yes, this is not unusual. Beyond the logistics of the student currently being in Africa and the still open question of who exactly has control of the UGMA account, the main issue would be taxes (if any) incurred when the UGMA account is liquidated before the money is moved to a new or existing student-owned 529 account. I guess it would mostly come down to whether or not the benefit of having the funds in a 529 account that is reported as a parent asset on FAFSA is worth the cost of any taxes incurred upon UGMA liquidation (plus the administrative hassle of making this happen).
Edited to add: student-owned 529 accounts are sometimes referred to as “UGMA/UTMA 529 accounts,” at least before the student reaches the age of majority and is able to take control of the account. As with a regular UGMA/UTMA account, the same principles apply and an account custodian manages the account until the beneficiary/student reaches the age of majority.
@BelknapPoint for $500 additional EFC (which can be paid out of the UGMA account)…I’m guessing it’s not worth the hassle to switch this account to a 529.
But I do still think the family should amend the financial aid forms to reflect this asset. The asset was there the day they filed the form.