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It's actually going up to age 24 if the kid is a dependent.
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<p>I think 18 is the magic number not 24. A lot of factor goes in such as what income threshold, investment income, etc.. from the above link from the IRS.</p>
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"Was" is the key phrase in that sentence. When you fund an UTMA or UGMA you are giving that money to the child. It is not revocable. However, like was said before, you can transfer it to a student owned 529.
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<p>I did do a transfer. The financial institution let me do it. Not sure what is the argument about. The financial institution made the check out to me. The tax is paying on the yearly basis which is deducted from the trust. Base on what basis can my child sue? She is a minor and I'm the guardian. I can see an exception to the case if the child can produce document that the income was earned from work or paycheck that was made out to the child, ie child actress.</p>
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Q: Are UGMA and UTMA accounts still good choices?
A: For many years, UGMAs/UTMAs were the only substantial education savings vehicles available, so many investors have built up sizable amounts in these accounts.</p>
<p>UGMA/UTMA accounts do not have income or contribution limits. And, at least part of your earnings may be exempt from federal income tax. Some or all will be taxed at the childs lower rate if the child is under age 18.</p>
<p>Contributions to UGMA/UTMA accounts are irrevocable, meaning that once the money or other property has been given, you cannot change your mind and withdraw the gift.</p>
<p>You can withdraw money anytime for the benefit of the child not just for education. The child assumes control of the account upon reaching the age of majority (18 or 21 in most states).
<p>Currently, kids under 18 have to pay a certain amount of tax at their parents' rate if their investment income is at a certain level. That age rises in 2008, depending on whether the kid is "dependent". It can be as high as 23 (in the case where a kid is a full time student supported by parents).</p>
<p>99 cents, you seem to feel I am "arguing" with you. I am not claiming to know anything about your finances; I am just trying to be helpful by giving facts (and I truly believe no one should trust anonymous CC posters but seek live financial advice-CC is just a good starting point, like wikipedia). I am sorry if anything I posted appears to be a personal attack, that was not intended.</p>
<p>I did not think you were. I too was pointing out facts that the UTMA account is not set up solely for college fund. It can be used for anything like buying a car, paying for car insurance. I did not set it up for college purpose. I only set it up as UTMA because there is this mutual fund with fantastic record that only accept UTMA account, nothing else. I set up as a yearly gift for my kids. When they were young I did not want to spoil them with so many gifts, they had plenty in my opinion. So I this account was set up for that purpose. Why did I close the account? The performance record turned really bad and I did not think it was worth to keep it as such restrictive account. Besides, when I set up the account, I set the age that my kids can take out the money to be 25. That seems to be changing now that they are getting older. They want the money out now.</p>
<p>What you have might not be a UTMA/UGMA account, I know you keep referring to it as a trust so perhaps it is a different kind of account. Typically a UTMA/UGMA account would be available to the child at 18 or 21. You are correct that a UTMA account can be used for many things on behalf of the child, not just to fund college.</p>
<p>We did UTMA also. We also did Education IRA and 529s, EE. Each program had its purpose with some did well and others did not. We do the best we can but things seem to always changing on us. DS now 22. We still have two UTMA that are still under this structure because he's not around to sign the turnover papers and because I need to have access to the account to pay for some of his expenses-health and life insurances, reimbursement on credit card purchases that he makes on our freq. flyer card, student loan payments. He is in Canada temporarily and having mail and making payments from there is not convenient. His next stop is India, same problems and we will continue the current system until he gets a better handle on something more permanent.</p>
<p>Would it make sense to transfer the UTMA to UTMA/529 since it will not be counted as child's nor parent's asset before the end of this year for a senior? I understand the account will need to be liquidated and capital gains and distributions paid out before putting it into a UTMA/529.</p>
<p>lousyanamom - That sounds totally logical; I just can't find some authoritative publication to support it...What I'm also not sure about is what the colleges themselves do about this asset, just because FAFSA doesn't show it, does every college ignore the possibility that a kid could have $80,000 in a UTMA/529 account?</p>
<p>lousyanamom - it generally makes sense to "shelter" kids' assets from the FAFSA calculations by moving them from UTMA (assessed at 20%) to a UTMA/529 (assessed at around 5%). However, everyone's financial situation is different. You should probably calculate your EFC both ways and see what makes sense for you, and also research where you think the best returns will be (your own investments vs those in a 529 which you can't control as well), plus look at the fee structure of both options. Also there's the question of what timeframe you're looking at - there's no rush to transfer from UTMA to 529 if you've got 10 years before kids are in college, for example. So, there's no one size fits all answer, but in my case it made a lot of sense to liquidate most of the UTMA and transfer funds to the UTMA/529.</p>
<p>vballmom- just went back and read your prev. post -so what it sounds like is in 2009, a 529 owned by the child will have the same advantages as a 529 owned by the parent in regard to the FAFSA? So if there was a UTMA cash account (no capital gains) it would make sense to transfer it to a 529 account owned by the child to get the financial aid benefits in 2009?</p>
<p>muffy333, vballmom,
Thanks for your response. D will attend college in the fall-that's the reason we are debating whether or not to make this move, I will certainly work out the profile both ways-with and without. You are right that we will not have to report it on FAFSA but I didn't even think about how the colleges would look at the UTMA/529.</p>
<p>This is why I love CC; I have been obsessed with how to spend down my junior's UTMA money market account for FA purposes, but I really don't want to buy her a car; very pleased that I can just put it into a 529 she owns next year so it would be assessed at 5% when I complete the FAFSA. I guess it would be good to wait to make the transfer just before I do the FAFSA so I have control of the UTMA account.</p>
<p>I have a question to all this about my kids' 529 accounts. #1 is a college senior whose account has now been all liquidated. #2 is a freshman and #3 is a HS senior going next year. Since all the accts have been custodial with the child as beneficiary, we must continue to claim the money as parental assets. However, if we were to transfer both #2 and #3's money to #1's account (who will conceivably apply to graduate school in a few years), can we avoid listing the total on 2 and 3's financial aid applications for the year 2009-2010?</p>
<p>We are in the middle of dd's freshman year, with three more of the ten tuition payments to go. While we could pay those out of parent funds we have set aside for this year, can we take money from a student fund in the next month or so, put in the bank account we have for these tuition payments, and thus not have it count as student assets for next year's FAFSA/PROFILE?</p>
<p>I don't have the answers to either of your questions, but you could post on Savingforcollege.com</a> - The internet guide to funding college and Section 529 college savings plans. If you do not get satisfactory answers on that forum then they have a feature where you can search for the closest 529 pro and ask your question. Tax laws keep changing and it may be best to consult someone who has access to the latest info in the field.</p>
<p>obsessed mom: My take on your question is that regardless of whose 529 account your children's assets are in, they're still parental assets and would be reported. So if you transfer assets of #2 and #3 children's 529 accounts into child #1's, child #1's 529 account is reportable as a parental assets. If you did nothing and kept child #2's and child #3's accounts as 529s, they're still reportable as parental asset.</p>
<p>From finaid.org regarding assets of other children (NOT 529s but other investments that a parent might make as a gift to the child):</p>
<p>"The assets of other children are not considered by the need analysis formula. So putting parent assets in the name of a younger (or older) sibling can help shelter them from the need analysis. On the other hand, when that child enrolls in college, his or her assets will be assessed at the usual rate for students..... many schools now ask for the assets owned by the student's siblings, so this strategy may affect the awarding of institutional funds."</p>
<p>Once the asset is in the child's name, it belongs to the child and can't be "taken back" by the parent, although it can be spent to benefit the child as pointed out in posts above.</p>
<p>momfromme: taking money from a student fund (I'm assuming you mean a UTMA/UGMA account? or the student's savings account?) and moving it to a parent's account is typically not allowed by state law. Better to move it into a student-owned (custodial) 529 account because it will be completely ignored by FAFSA next year. For your DD's last 2 years of college it will be assessed at the low 5.6% rate.</p>
<p>From savingforcollege.com:</p>
<p>"The 2006 law now prevents a 529 account from being treated as a student asset on a FAFSA filed by a dependent student. This means a custodial 529 will no longer be subject to the 20 percent assessment rate. In fact, it shouldn't be included on the FAFSA at all. The transfer of UGMA/UTMA assets from taxable investments into a 529 plan can immediately produce much higher eligibility for federal financial aid. Even if Congress decides that this result was not intended, and enacts further changes to eliminate the "loophole," the worst case is likely to be treatment of the student-owned 529 account as a parent asset. This would still produce a substantial benefit."</p>
<p>NOTE: Congress CLOSED this loophole effective in 2009.</p>
<p>However, my worry is that the SCHOOL could still consider the 529 a child's asset, and then deduct that from any financial aid. I have not been able to find a satisfactory answer to that question: D's grandmother owns the 529. If we use the money for D's tuition, I am afraid it will trigger institutional, professional judgment (whatever that is), and that will lower her financial aid for the following year(s). So, we are considering using the 529 in grandma's name for the last year of tuition ONLY. We would not take the loans, and we would use as much as possible for the final year. Whatever is left, grandma can either transfer to another grandchild, or my D can use for grad school. Does this make sense?</p>