Another source confirming this treatment on the FAFSA (which in my experience, no CSS Profile schools deviate from):
“Money held in a 529 plan, and the plan’s ownership status, comes into play when determining aid eligibility. If the account owner is the student and that student is dependent, or the account owner is the parent of a dependent student, 529 plan funds are treated as a parent’s asset on the FAFSA…If the account owner is an independent student, 529 plan funds are treated as the student’s asset.” https://smartasset.com/financial-advisor/529-plans-custodial-vs-individual
I addition to the previous “loophole” I described about dependent student-owned 529 being treated as parental assets above, you might have notice a sibling loophole. This article expands on that:
First it states " If the 529 plan of a dependent student is a custodial 529 plan, it is reported as a parent asset on the student’s FAFSA. If the 529 plan of the student’s sibling is a custodial 529 plan, it is not reported as a parent asset on the student’s FAFSA, just on the sibling’s FAFSA.
And then it goes on: " Loophole Involving Custodial 529 Plans of a Sibling
This creates a loophole where 529 plan assets of a sibling are not reported on the FAFSA if the 529 plan is a custodial 529 plan and not a parent-owned 529 plan…
…This loophole may become more important under the new simplified FAFSA for the 2024-25 academic year. A major change in the new FAFSA rules is that families will not receive any benefit from having more than one child in college at the same time…"
As far as explicit guidance from the CSS Profile itself, that’s harder to find. My guidance would be in the absence of explicit documentation stating otherwise, to declare assets consistent with federal definitions and rules that have been in place since 2009.
This mentions the origin of when this rule went into effect:
"Section 529 College Savings Plan asset of account owner (low impact if owned by student or parents; high impact if owned by a third party)…Custodial 529 college savings plans owned by a student, where the student is both the account owner and beneficiary, are reported as a parent asset if the child is a dependent student and a student asset if the student is an independent student. This treatment is effective with the 2009-10 award year due to a legislative change enacted in the College Cost Reduction and Access Act of 2007. " https://finaid.org/savings/accountownership/
It also states that this is not the case for other types of custodial accounts: “UGMA/UTMA Custodial Account: asset of beneficiary (high impact)”
Could a CSS Profile school treat a dependent student-owned 529 as a student asset? Sure. But I haven’t seen any cases of this in my own experience talking to at least a half-dozen FA offices directly about this issue, or in multiple on-line forums where the universal experience is the CSS Profile schools treat them as parental assets. Unless someone presents evidence to the contrary, I wouldn’t think is is a likely occurrence. If there is a school that in inclined to do that, they would ask specific followup questions about the declared parental-owned assets anyway.
In filling out the CSS Profile initially, there would no reason not to properly declare a custodial 529 account of a dependent student as a parental asset.
First, we are addressing student-owned 529 accounts (also known as custodial 529 accounts). The source that these accounts are reported on FAFSA as a student asset, as long as there is no requirement to report parent information, is FAFSA itself. See the instructions on page 9 of the 2023-2024 FAFSA pdf version, starting with “Investments also include…” 2023-2024 Free Application for Federal Student Aid
For Profile reporting, absent any similar specific instructions and based on common sense and my own experience, a student-owned 529 account, as an asset legally owned by the student, should be reported as a student asset. Again, this is for a student-owned (or custodial) 529 account, not a “regular” 529 account, which is usually owned by a parent and in such cases should be reported on both FAFSA and Profile as a parent asset (duh).
Sometimes yes, sometimes no. See what I wrote above regarding FAFSA reporting. If you are replying to my immediate past post, you are writing as though you think I don’t know the difference between a “regular” 529 account and a student-owned (or custodial) 529 account. Nothing could be further from the truth. I have been the custodian for two student-owned 529 accounts. I know what they are, I know how they work, and I know the reporting differences on both FAFSA and Profile between these accounts and a 529 account that is not owned by the student.
Correct. Now change the word “dependent” to “independent” and the FAFSA reporting requirement changes.
Then your experience is different than mine. That doesn’t mean either experience is invalid.
This suggested “strategy” is unethical and arguably illegal. A deposit of money to a student-owned 529 account by someone other than the student/account owner would be considered an unconditional gift. Once it’s deposited, it can only be used for the benefit of the student/account owner while the account is under control of the custodian (before the student/account owner reaches the age of majority); after the student/account owner reaches the age of majority and assumes control of the account, the funds can be distributed (or not) however the student/account owner sees fit, subject to the normal 529 rules and tax implications.
Why are we only addressing those in the first place? You were responding to my advice that talked about trying to avoid distributions from an estate directly to a child.
You also seem to ignore that I discussed custodial 529 accounts at great length I provided this information for the OP on the thread. It’s irrelevant whether you know the details of these or not. And you provide no evidence whatsoever for your advice to contradicts specific federal definitions of assets , and long-standing rules for FAFSA treatment of these. I would say this actually runs completely against “common sense”.
You seem to be really focused on non-dependent students. That is not the case in the scenario described in this thread (and is rarely the case anywhere for most college students), so your posts are not helpful in this regard. You seem to be here specifically to argue for whatever reason on issue that are not germane.
For the general thread audience: be aware that there may be situations when a student-owned 529 account should be reported for need-based financial aid purposes as a student asset. To find out if this applies in your circumstances, you can call the school’s financial aid office. With this knowledge in hand, you can be better prepared as you journey down the financial aid path.
Also for the general thread audience: distributions from an estate directly to a child that are used to fund a 529 account would need to be added to an account owned by the child/estate legatee. As mentioned above, this is known as a student-owned or custodial 529 account. It is also known as a UTMA 529 account. The inherited money is the legal property of the legatee, and while the legatee is a minor and the funds are under the control of a custodian, the money can only be used for the benefit of the legatee. The inherited money cannot be placed into a “regular” 529 account owned by someone else (like a parent or grandparent) even if the child/legatee is named as the account beneficiary, because under 529 rules the account owner could then do whatever they wanted with the account money, including withdrawing it and spending it on themselves.
For the general thread audience: be aware that the only documented situation where this applies is for students who are legally non-dependents.
However, for the vast majority of college students who are dependents, 529 accounts should be reported for need-based financial aid purposes as a parental asset–this applies to the FAFSA application as well as the CSS Profile. And it applies to 529 accounts actually owned by parents (as is true for the vast majority of 529 accounts) as well for the comparatively rare cases of custodial 529 accounts.
Confirming this with individual FA offices can put your mind at ease (that’s what I did at multiple institutions!), but the above is the evidence-based approach to filling out the forms.
How to report assets on FAFSA, for both parents and the student, whether dependent (parent information required) or independent (no parent information required), is spelled out pretty well in the FAFSA instructions. Read the instructions carefully and ask questions if anything is confusing. For asset reporting on Profile, it’s not so cut and dried, especially for students who have certain assets in their own name. And since different Profile schools use the information collected on Profile in different ways when they distribute institutional need-based aid, it can sometimes be difficult to know how certain information should be reported. If in doubt, always call the school’s financial aid office and ask to speak with a knowledgeable staff person.
Another poster on this thread has stated that situations when a student-owned 529 account should be reported for need-based financial aid purposes as a student asset would only apply to students who are legally independent. This is not correct. As suggested upthread by momofboiler1, I would send a PM to this poster to explain why their position is not correct, but unfortunately the other poster is not accepting private messages. If this other poster will please tell me what kind of documentation or evidence will be satisfactory to support what I am stating, I will do my best to comply, but since the nature of internet forums like CC is generally based on personal experience and anecdotes, I’m not sure how successful I will be. In that case, I will need to let my words rest on whatever reputation I have established here.
That’s a bit of a misnomer. UGMA/UTMA accounts are different than 529 accounts. (Occasionally you’ll see consumer finance websites confuse the issue, which doesn’t help as it misleads people).
For need-based financial aid discussions, it’s better to keep the terminology clean and distinct because–while they are custodial–UGMA/UGTA accounts should be reported as a student asset on the CSS Profile, whereas custodial 529 accounts for a dependent student should be reported as a parental asset.
Not always. A broad claim like this that has exceptions does a disservice to CC readers, who may unfortunately act in a way that may not be in their best ineterest.
As you are filling out the CSS Profile with information from your deceased husband’s taxes, you should only include the life insurance proceeds under one category, either investments or untaxable income. Putting it in both places would result in double counting. Regarding the survivor benefits from Social Security, you should include the full amount for all household members, including your high school student.
This is because the benefits are intended to support the entire family, not just the college student. As for your expected contribution towards college tuition, it is difficult to provide an exact figure without more specific information about your financial situation. However, given your income and expenses, it is unlikely that you would be expected to pay the full $30,000 per year.
The colleges will consider your overall financial situation and determine an expected family contribution (EFC) that you can afford. You can appeal the financial aid packages if you believe the EFC is too high.
But many things are double-counted as income in the past and subsequent assets in the present on financial aid forms.
I tried to find some clarity as to whether a life insurance payout would be considered income in the first place for the CSS Profile (it’s clear that is untaxed). Many people opine with absolute certainty on forums that it is not income. However, the following poster contacted the College Board themselves and were told that it should indeed be reported as untaxed income (the poster also stated elsewhere in the thread that a college FA officer told them the same thing):
Based on that, my previous advice to the OP here still stands: to report a payout as both current assets in the current filing as well as past income in a subsequent year’s filing of the Profile. And to also describe this in the special comments section to make the FA office aware of the situation and hopefully get a determination from them that they will not double-count as income and assets in the future.
The likely outcome is that they exclude the untaxed income from the insurance payout(s) and only account for the asset value.
But here is what the CSS Profile asked for in this category for this past year’s filing:
“Social Security benefits received for all family members, except any who will be enrolled in college in 2023-24, that were not reported on a tax return.”
I did speak to a lawyer. Its pretty straightforward. I had just forgotten about the 529 accounts so I didnt include those in the estate assets. I figured they had to be used for education and the children they are for are still alive. There really isnt much money in them, $17k for one and only $4k for the other. The judge already declared the estate insolvent. Everything worth anything passed directly to me, except I need to figure out these 529s.