Hello, This is my first time posting on CC. Thanks for the anticipated help. Question is as follows. How do we access the money in the Grandparents 529 plan to pay tuition for Spring semester of Sophomore year and going forward? The goal is to continue to maximize financial aid at a CSS Profile school. There will be another sibling attending college next year. CSS Profile for 2024-2025 has been completed, FAFSA application has not. As I understand it options include: 1) rollover from grandparent to parent owned acount, which would increase assets, or 2) distribution to student and then have student pay school. This used to count as unearned income on FAFSA, but will no longer, but may on CSS Profile. Have I missed anything? Thanks for your input.
Can the grands pay the college directly?
Thanks. They probably could but wouldn’t CSS school see that as a gift or untaxed income?
@BelknapPoint are payments directly to the school viewed as gifts or untaxed income?
@kelsmom ?
The grands could also gift the money to the parents. Then the parents could pay for college. Gifts have no tax implications when this is done…I believe.
I would assume that money from a grandparent 529 to the student would be considered a gift for Profile. When it had to be reported on FAFSA, it was considered a gift. It doesn’t matter how it’s paid, if paid on behalf of the student it is a gift. If it is possible for the grandparent to roll it over to the parent account, it is considered a parent asset.
But if it’s paid out to the school before the next FAFSA is filed…it wouldn’t be an asset either, right?
So submit the fafsa. Assets are reported as of the date of filing. Then couldn’t the grands gift to the parents who would then just pay the bill?
I could be wrong…so hoping the experts chime in.
The account owner controls access to the account, and can request a distribution by contacting the account administrator. Generally, distributions can be handled in one of three ways: directly to the school, to the account beneficiary, or to the account owner.
It depends who is doing the viewing.
Standard IRS gift tax implications in this scenario.
So really…this gift would have no immediate tax implications. The grands might need to complete a form if they (two of them) exceed the allotted amount for the year. But unless they are giving more than the total lifetime amount (and no college costs in the millions), there really is no tax issue…just a form to complete.
Correct? @BelknapPoint
Yes, highly likely just need to file a gift tax return (for reporting purposes only, no actual payment of tax) if the gifts exceed the annual exclusion amounts.
Thank you all.