Joint-Ownership 529 account

Paying for College
1

<p>I'm new at posting so here goes...</p>

<p>Background:
We have 2 kids, each of them have a 529 account of which my wife and I are the custodians. That is... My social and her social is what's on the two 529's. The kids names are on their, but we are the guardians.</p>

<p>When researching the category of asset management, articles are saying that for parent-owned 529 accounts, up to 5.6% of the value is included in the EFC as a parent asset. </p>

<p>My question is this: Do I have a parent owned 529 or do I have a 529 in the childs name? At first I thought that you could not open a 529 account unless you submit a childs name but now I'm confused. Do I need to remove the childs name from the 529 for it to be considered a true parent asset and not a child asset?</p>

2

<p>Also - for the EFC calculators: is ownership of a 529 considerred a parental asset (like cash) or is it protected from EFC analysis?</p>

3

<p>Correct me if I am wrong, but isn’t a 529 account specifically for higher-education purposes? If so, I think these accounts will (and should) be counted as the child’s asset, or at the very least your asset. Definitely not protected from EFC analysis, since it is /for college/.</p>

<p>Though I could easily be wrong. If it isn’t included in the EFC, its probably included in CSS.</p>

4

<p>It is a parental asset and is reported for calculation of EFC on Fafsa</p>

5

<p>As noted above, the 529 must be declared as a parental asset and it will increase your EFC, but not significantly. See [this</a> article](<a href=“How do 529 plans Affect Financial Aid? - Savingforcollege.com”>How do 529 plans Affect Financial Aid? - Savingforcollege.com) on 529’s. When, or even if, you draw on the account to pay the student’s college expenses is also entirely up to you.</p>

6

<p>I just had this conversation with the fidelity rep last week. There is the UTMA (irrevocable) and the regular 529. The UTMA is considered a child’s asset. the regular 529 is calculated as parental asset. The UTMA is the one where the child is named on the account, and when they become 18 yrs old, then they become the owner of the account and have the right to force the guardian to transfer the account to the child’s name. UTMA can not be transferred to a different beneficiary. Non-college expenses can be paid as well. The other 529, which is the norm, the owner of the account is the parent, or any qualified individual. The child named is not the owner or co-owner, just the beneficiary. The owner-parent has the right to change the designated beneficiary at any time, but the funds always have to be used for educational expenses, otherwise they are taxed, and this is a revocable asset.</p>

7

<p>from the reading that I’ve done on this topic, this is a custodial account. This is a parental asset. </p>

<p>"Effective July 1, 2006, the custodial versions of these savings vehicles are not considered an asset of a dependent student. The US Department of Education is interpreting the law to indicate that such funds are not reported on the FAFSA. (See Dear Colleague Letter GEN-06-05 which suggests that if the student and not the parent is the account owner of the plan, it is not reported as an asset at all.) Specifically, to be disregarded as an asset, all of the following must be true: </p>

<ul>
<li> The account must be a custodial account, meaning that the student is both the account owner and beneficiary. </li>
<li> Only 529 College Savings Plans, Prepaid Tuition Plans and Coverdell Education Savings Accounts qualify. </li>
<li> The student must be a dependent student."</li>
</ul>

<p>I"m hoping that as a parental asset - it will be somewhat protected under the APA (Asset Protection Allowance).</p>

<p>Hopefully what I’ve pasted above is not 4 years ols either…</p>

8

<p>Even though a UTMA is owned by the child, a 529 UTMA account is reported as a parent asset on FAFSA. it is a rule that was introduced 4-5 years ago.</p>

<p>from [url=<a href=“http://studentaid.ed.gov/students/publications/completing_fafsa/2012_2013/ques3-2.html]Completing”>http://studentaid.ed.gov/students/publications/completing_fafsa/2012_2013/ques3-2.html]Completing</a> the FAFSA 2012-2013/The Application Questions(40-42)<a href=“question%2041”>/url</a></p>

<p>

</p>

<p>It is lumped in with parent assets and treated no differently from other investments and assets. After the protected asset allowance, the maximum impact parent assets can have on the EFC is 5.6%.</p>

<p>UTMAs other than 529 accounts are reported as student assets. Student assets have no asset protection and 20% goes to the EFC.</p>

9

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</p>

<p>You have a parent-owned 529. All 529s are reported as parent assets on FAFSA.</p>

<p>There are 3 types of accounts being discussed here:</p>

<ol>
<li> Parent-owned 529s for the benefit of the child. These are reported on FAFSA as a parent asset.</li>
<li> Child-owned 529s. These are known as UTMA-529s. They are reported on FAFSA as a parent asset.</li>
<li> Child-owned UTMAs (parent is custodian). These are reported on FAFSA as an asset of the student.</li>
</ol>

10

<p>529 are parent asset because the parent can take the $ back. It has not technically been given to the student. My parents opened them for their grandkids knowing that if they needed the $ for some reason that they could still use it.</p>

11

<p>And the wonderful thing about grandparent-owned 529s is that they’re not reported on FAFSA at all :)</p>