Asset owned completely by parent but child given access to it, is the way I look at it. Any interest earned on account gets reported totally by parent. I have had accounts like this with my kids as well as my elderly mother/MIL. Accounts belonged to the person whose name was on theme first, with the second person allowed access to them. Still have one with my late mother. It’s my account, not hers.
Fine, as long as the asset really is owned completely by the parent. Many joint parent/child accounts are established when the child is a minor and the parent is on the account for reasons of convenience, even though all the money in the account is the property of the child. For FAFSA, an account like this should be reported as a student asset.
If it’s a joint account and some of the money in the account is the student’s and some is the parent’s, that distinction will need to be made when reporting assets on FAFSA. Under whose SSN the interest gets reported is not a determining factor here.
If the funds are in a custodial account under either the Uniform Gift to Minors Act or the Uniform Transfer to Minors Act, gifting the funds back to the parents would be a no no.
If the kid is now age 18, the kid could transfer the funds into a new, non-UTMA/UGMA account, and then gift back to the parents?
The age of trust termination is 18 to 21, depending on the state and whether it is an UGMA or an UTMA. Most UGMAs end at 18 and most UTMAs at 21, but it does depend on the state.
Meanwhile, over on the Foreign Income Exclusion thread a US family who earns over $100k ($70k in cash and at least $50k in noncash benefits such as housing and private school payments) can write off the first $97k of income plus some housing and food costs, bringing their AGI down so low that they qualify for full Pell. Our regulations make no sense.
If you move funds to someone else’s bank account, then that money then belongs to that person.
Joint account funds belong to everyone on the account, but not divided equally. If you have a joint account with a spouse, all of that money can be withdrawn by either spouse, not just half of it. If you have a joint account with a child, they can withdraw all of it, or you can withdraw all of it, at any time. I am not sure how you’d report that to FAFSA.
I have often read that in the months/years preceding college, the family should spend any money in the kids’ names first. I suspect that how this is handled is different in different families, and where the kid’s money came from. If it is actually ‘family’ money,…from allowance,etc, or if it is money the kid earned on a job and saved…it could be viewed very differently by the family.
This is simply not true. If I entrust a friend of mine with $1000 for safekeeping while I am out of the country for a few weeks, does that mean that the money is now his, to do with as he pleases? Does your answer change if he puts it in his savings account while I am away?
As far as your notions about ownership of funds in a joint bank account, check out this link:
Edited to add: And here’s how FAFSA treats assets in a joint account:
Part ownership of asset. If you (or your spouse) own an asset with others and therefore only own a portion or percentage of the asset, you (or your spouse) should report the net asset value that represents only your share of the asset owned. You would determine the current market value of the asset, reduce the value by any outstanding debt, and then multiply the net asset value by your ownership percentage. This result is then reported on the FAFSA.
It’s an interesting thread, but the odds of doing any financial gymnastics that are going to significantly impact FINANCIAL AID for a family that has a current EFC of $80,000 are pretty slim, right? Even if a significant amount of the student’s assets were used in freshman year, it is still going to leave a hefty EFC to receive financial aid. This would be doubly true if it’s a school that doesn’t guarantee to meet need.
But here is the holding from the Maryland case, that the defendant WAS NOT a joint owner by the facts of that case.
“Under these statutes, the court sought to determine “ownership” of the account and concluded that the lower court correctly found that a “joint owner” account presumptively creates an ownership interest in both parties, but that presumption may be rebutted by evidence of the original owner’s contrary intent. Here, the court determined that there was sufficient evidence to support the trial court’s finding that the defendant was not an owner…”
The presumption is the if there are two names on the account, it IS a joint account. I’d venture that most courts would determine that a parent IS a joint owner of the account, that money had been put in by parent and child over the years, that it was available for family needs over the years. In the Maryland case, the daughter was added to the joint account but had never contributed to the account and it wasn’t the intention of the father (who opened the account) that she’d be a joint owner but that she just have access as a custodian, much like a lawyer or accountant would have access to help a client.
I opened my kids’ account. It WAS my intention that we be co-owners, that any amount in those accounts could be accessed by me and, at some point, by them. The bank never questioned my depositing or withdrawing money in the 18+ years those accounts have been opened. Why did I put money into separate accounts? Convenience. I could have put all that money into my accounts (checking or savings) but you get more FDIC/NCUI protection with more accounts. When my kids got scholarship money paid directly to them, I deposited it into their accounts and moved it to my account (so I could actually pay the tuition) immediately.
Not an owner of the money in the account, but still a “joint owner” listed on the account, with the authority to complete transactions as a fiduciary of the other person listed on the account. The defendant was legally allowed to access the account, but she wasn’t legally allowed to use the account funds for her own benefit. There’s a huge difference. The court is making a distinction between being listed as a joint account owner and actually being entitled to use the funds in the account for your own benefit. The court didn’t say that the defendant was wrong to withdraw money from the account; it said that she was wrong to withdraw money and not use it for her father’s benefit.
You must have have had some large account balances. FDIC/NCIU protection only becomes a consideration at $250k or more (I think $500k now). Anyway, I hear you on the convenience argument. Like most parents, I think, I opened joint accounts for/with my minor kids so they could have a savings account for their money that I could easily manage and access while they were young. The money that was deposited in the accounts was from birthday and Christmas gifts, babysitting or pet sitting, etc. In other words, it clearly wasn’t a parent asset, it belonged to the child. As the parent, I was really acting as a fiduciary in managing the account, with all of the rights and responsibilities that word implies. That means that the money in the account is not available for “family needs,” whatever that is, but is to be used only for the needs or benefit of that particular child.
Back in the day when these accounts were opened, the FDIC insurance was only $100k and is now $250k, but you can get up to $1.5M by having different ownership on accounts at any one bank. If I had that much, I wouldn’t worry about qualifying for a Pell grant but when my kids were 6 months old, I didn’t know how much I would have in the account. There are reasons for having joint ownership on accounts.
I still think you are not looking at the Maryland case correctly. The PRESUMPTION is that it is a joint account with each owner having a right to all the money in the account. In THIS case, the plaintiff (father) overcame the presumption as he showed it was not his intention to share the money, just to have an ease of administration. That was not the right way to accomplish that goal. It is NOT a good idea to give joint ownership if you do not intend to share the funds with other owners, that courts and banks and others (FAFSA?) will presume that the intent IS to have joint ownerships with each side having the right to the total, and it will be your burden to prove otherwise and overcome the presumption. No attorney or banker would (or should) advise to add someone as a joint owner and then require you to overcome the presumption.
I’m confident that I can treat my children’s accounts as my own (or half mine) as that was my intention when I opened them. I have no moral issues with it. I have no banking issues with it. I have no FAFSA issues with it.
There was no plaintiff, as this was a criminal and not a civil case. In any event, I guess we’ll have to agree to disagree on what the case means.
So if a joint account that you opened under your name and your 10 year-old child’s name had $500 in it, all birthday or holiday gifts to your child from friends and/or relatives, you would have no issue with spending half of that money on gas for your car to get to and from work, or concert tickets for you and your best friend from high school, or cigarettes/wine/slot machines (pick your favorite personal vice)?
I would have, and did have, no problem using that money to pay the rent or buy food for the family when we needed it. We had some lean years, and I did have to use the money so the initial money is no longer there. We are a family. We pool our money when needed. I have no issues using it to pay for college too, just as they have no problem using ‘my’ money. Gas to go to work? No issue using money for that whatsoever as that is a family purpose.
I’ll assume that you draw the line at using your kid’s money for concert tickets for yourself or cigs/booze/gambling (if any of those are your thing), since you didn’t say that would be OK. So you do have limits; you aren’t treating it as if it really is your money to do with as you please. If I’m wrong about that, please correct me.
When anyone GIVES you money without legal contract stipulating the conditions, you can do as you please with it without legal consequence. That is the “price” of giving anyone your money, including often trusted, beloved people like parents, children, grandparents, best friends. The risk is there. So there is no line drawn as far as the law, FAFSA, etc is concerned.
In some situations, the government and other entities have “look back” rules in place to prevent transfer of asset for some gain (Medicaid eligibility for the elderly in nursing home situations is an example where there is currently a 5 year look back rule). For FAFSA, that is not the case. The assets on the day you submit the FAFSA are the ones used for calculation of the EFC. Not the balance the day after or the day before.
As for moral issues, ethical issues on a personal basis, that’s a whole other story, and to each his/her own.
Yes, people do this money thing within families very differently don’t they. My college son had no issue at all taking my credit card out of my wallet to go buy gas and stop for groceries, too. I also had no issue with it, really. And, if I was broke and he had money I really hope he would share. lol.
Joint accounts are not always divisible in that they can be 100% one person’s money, with another having free access to it. I was joint with my mother on her account as a secondary, but I didn’t put a dime into that account, though I had access to every cent of it. I opened joint accounts for my kids who got the umbrella coverage of our premium customer status when I did this, and sometimes I put money it there, sometimes their money went in there, but with the idea that it all went to ME but they had access to it. No different than my son using his money to buy me things or me buying him. The parent/child conduit works well.
I was thorughly verified for FAFSA purposes one year and there was no blink on those such accounts set up under my name with full access available to my children. Though FAFSA and tax regs do not necessarily dovetail in many respects, when it comes to verification of a lot of things, the tax treatment of such things often prevail. Parents filing as separated on their 1040s are not going to be questioned about that status, whereas if they are fliing as married even separately, some questions are likely to ensue. If an account is listed as a parental asset and so treated, that another name is on there as a secondary with access but not so treated for any tax reasons, it isn’t likely to be contested.
I do concede, that in the very small chance that such an account is discovered during a thorough audit, that it is possible that some fin aid officer doing such an audit may raise the question. I called FAFSA twice and asked the question, by the way, about such joint accounts, and the answer I got, agreed with my way of thinking, but there is a lot of leeway among fin aid officers to make professional judgement about these things. Personally, I would treat the situation as I have been advocating, but that is a personal decision for each individual to make.
If by “gives” you mean legitimate gift, you are correct. When a grandparent gives a 5 year-old grandchild a fresh $100 bill as a birthday gift, the law would consider this an unrestricted gift to be used for the benefit of the child. If the child then “gives” the bill to a parent (or, more likely, the parent takes the bill) to deposit in a joint parent-child savings account, this doesn’t mean that the parent now has unrestricted use of the money for the parent’s benefit, in the eyes of the law.
What if the $100 bill had been placed in a piggy bank in the child’s room? Would it be OK for the parent to take it a month later to buy a case of wine? Does the answer change depending on whether the money is in a piggy bank or in a joint savings account? If so, what accounts for the difference?
The FAFSA instructions are clear that when there is a joint asset, like a bank account, the assets are to be divided as best as possible between the actual owners, and reported as such on FAFSA.
Part ownership of asset. If you (or your spouse) own an asset with others and therefore only own a portion or percentage of the asset, you (or your spouse) should report the net asset value that represents only your share of the asset owned. You would determine the current market value of the asset, reduce the value by any outstanding debt, and then multiply the net asset value by your ownership percentage. This result is then reported on the FAFSA.