<p>My twin sons will start college next year. They have UTMA accounts worth 2 years of private school education. At first we were set to move the money into Custodial 529s to enhance our finacial aid postion. On further investigation, it seems all their schools use the Profile, which I believe treats a custodial 529 as a student asset. Now we aren't sure that the FASFA advantage will have any true impact on our EFC. We are in the 75k range.
Can you advise?</p>
<p>It’s very hard to generalize about CSS schools because their formulas are typically unpublished. In the best case, the schools you’re interested in might have online calculators on their financial aid web pages where you could run a what-if scenario. Try putting the dollars as student assets then move them to parent assets in the calculator and see how the schools estimate your need. But for schools with no calculators or other text describing how they view parent vs student assets, your best bet would be to call the financial aid office and ask.</p>
<p>There may be other reasons not to convert from a UTMA to a Custodial 529 involving realizing capital gains and having to pay taxes on those gains in 2010. This will bump up your student’s reported AGI. Alternatively, the funds will grow tax-free in a 529 and so converting might be an advantage for your family, depending on how the UTMA is currently invested.</p>
<p>Thank you for your advise. I called a few of the schools. Their replies were that if the money originated in a UGMA/UTMA account, then it would count as a student asset. None said they followed the FASFA guidelines. I intend to work on the available calculators today to see if it confirms the phone call. Leaves me wondering if it really would be an advantage to make the move and restrict the money’s use.</p>
<p>How in the world would the schools know where the money originated from? What if you had decided to open a Custodial 529 with money that Grandma gave the twins for graduation from elementary school? Would they treat that differently from a Custodial 529 created with money from a UTMA? What if the 529 had both Grandma’s and UTMA funds in it?</p>
<p>You might want to take a look at the most recent CSS Profile form and see if it differentiates between parent-owned and child-owned 529s.</p>