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<p>Correct. Many plans do not allow a change in plan owner, although New York’s direct-sold 529 plan does now allow a change in account ownership at any time (effective November, 2013). iamlumberjack, which particular 529 plan are you talking about?</p>
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Maybe I’m misunderstanding the OP, but if his parents are the owners of the 529 and they transfer ownership of it to the grandmother, they have made a gift to the grandmother. The gift is not made to the beneficiary.</p>
<p>It is my understanding that monies paid by a third party (such as a grandparent) to cover college expenses were reportable in the next year’s FAFSA. Is this requirement obviated by shifting the ownership of a 529 at the correct time?</p>
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<p>But it is really a gift the money is still designated for the beneficiary. The person who originally put the money into the 529 was subject to gift tax because they were gifting it to the beneficiary and had to originally claim an exemption and or pay the gift tax. Because of that I would think that the parents are not gifting anything to the grandmother because it was gifted to the beneficiary. I would think that if the new owner were to cash out the 529 then it would be subject to gift tax. This all gets very complicated very fast so I’m going to make sure we get professional advice. But the 529 shuffle will be tax free either way, it either won’t be a gift or it can be covered under the exemptions.</p>
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<p>Precisely, by keeping only the 529 money that will be needed for the upcoming year in the parents hands and the rest elsewhere so it is not subject to the FA calculations and then “gifting” it to the parents at the right time.</p>
<p>The 529 plans that my parents have can have a transfer in ownership and if they are not allowed we could simply roll them into a 529 plan that does.</p>
<p>Looks like you may be right, OP. I just saw some posts in the forum on savingforcollege.com that support what you say. Guess I should have researched it more before I spoke up. I do suggest that you get professional tax advice before doing anything, though.</p>
<p>Sorry, but I think getting Pell, because you have the resources to manipulate the system, pretty awful. It may be technically legal, but that doesn’t make it right or ethical.</p>
<p>I don’t know that I would count on CSS/PROFILE having the same protection allowance as FAFSA.
It seems designed to dig up additional assets, not increase aid.</p>
<p>*What’s kind of unfair is that if you have saved money over your allowed amount, you get dinged 5.6% of it each year. *</p>
<p>Its unfortunate your money isnt in dedicated retirement accts.
Do you have retirement accts?
For $100,000 in savings, you will receive $2,859 less than you would have with zero.
<a href=“http://www.cbsnews.com/news/a-common-myth-about-college-financial-aid/[/url]”>http://www.cbsnews.com/news/a-common-myth-about-college-financial-aid/</a>
( although this may just be for FAFSA)</p>
<p>^definitely not true look at the formula
<a href=“http://ifap.ed.gov/efcformulaguide/attachments/091913EFCFormulaGuide1415.pdf[/url]”>http://ifap.ed.gov/efcformulaguide/attachments/091913EFCFormulaGuide1415.pdf</a></p>
<p>whatever you asset protection allowance you get is subtracted from the 100k then what is remaining is multiplied by .12.
In my case that means 60k remaining x .12 which equals $7200 not a paltry sum by any means</p>
<p>Look down lower in the formula. That $7200 is then added to your available income and at the highest end 47%(Table A6) of available income goes to EFC. So 47% of 12% = 5.64%.</p>
<p>"Sorry, but I think getting Pell, because you have the resources to manipulate the system, pretty awful. It may be technically legal, but that doesn’t make it right or ethical. "</p>
<p>Why are you sorry? You don’t agree. There are a lot of things about the FAFSA that are hinky, IMO. With FAFSA you get aid based on your custodial parent’s income and assets. If you are with a custodia parent with very little income but a lot of assets in a house, as many divorced women find themselves in, one can end up with the PELL grant. Happens all of the time. Many women I knew who divorced would get the house in nearly paid off status as a settlement and would borrow via HELOC against the value of the house while kid is in college. Keeps income down,maximizes college aid.</p>
<p>We are talking about $5K ayear in grants from FAFSA only schools that do not tend to meet full need. PROFILE schools want both parents’ financials. </p>
<p>So yes, those who forego schools asking for NCP info and have a low income situation, and can get some money from the school, PELL, loans, maybe even the state, work study, can make out a bit. </p>
<p>I know families around here who get financial aid and they live in sumptuous homes, owned by their own parents, and have been living on well to do parents’ funds. They plan ahead so that it doesn’t come into play during those college years. They borrow instead of get gifted the money, make sure it is well documented and that interest is duly paid, and the loan is forgiven. That can worth hundreds of thousands of dollars in aid.</p>
<p>My friend is well to do and her kids are not doing as well. She will pay for her grandparents education if it comes to that but she will makes sure that she explores all the ways to maximize grants that they get based on their low parental income first. </p>
<p>There is nothing new about that. My DH was on near full fin aid from a top 25 university, when his grandparents were very well to do. His mother had no real income. They just were careful to follow the rules and not have money given to them, loaned, but not given during the college years. Those who are well to do often explore every angle. </p>
<p>As all should do when looking for financial aid.</p>
<p>Hmm so i messed up the calculation… at only a change of 2800 dollars per year I’m inclined to think that it is not worth the effort to do this.</p>
<p>A lot of people come to that conclusion.</p>
<p>I was wondering where you were getting the 7000 difference from as the max that assets will impact the EFC is 5.6%. Annoyingdad is correct. In the EFC formula, 12% of assets go to available income. Then the max available income that can go to the EFC is 47%. 47% of 12 % = 5.6%. A lot of trouble for a minimal difference.</p>
<p>Do check with your state for rules. Changing beneficiary and changing owner is *not *the same thing. Some States do not allow ownership changes. Some will treat is as a distribution which could have huge tax implications.</p>
<p>For all the gift tax people out there - each person has a $5.3 million exemption for lifetime and at death gifts, so estate tax is rarely a concern these days except for the very wealthy (at that level, those folks are not worrying about FAFSA). I am always surprised to see how many people comment about generating gift taxes for these relatively minor transactions.</p>
<p>Can’t argue with the statement that legal is legal, which brings into question the ethics of special interests that manipulate the tax laws to their advantage. That’s not likely to change soon. OP, just report your assets honestly and legally, use the extra time for something useful.</p>
<p>I don’t think a lot of the niches that give favor or charge more for certain categories has to do with special interests. Just the quirks of an imperfect system, and a matter of luck if you fall into a situation where you can take advantage. But for a lot of the manipulations, there are significant drawbacks and risks… </p>
<p>Some years ago, students took out the loans with the understanding that grandpa would repay them upon graduation. When she passed away, there was no menton of that in her will, and other family members refused to give up a dime of their shares to honor that promise, even though they knew about it. You give your assets to someone to "hide’ them, and you may not get them back. Strike the kind of deal my friend did with her ex, and if the ex reneges, you are up the creek. Play around with your assets changing names, moving them around, and you do have to keep track of all of this, fill out the paper work, watch the time line, yes, it can be a pain, and mistakes can and do happen. There is a price to playing these kinds of game. You gotta keep your eye on the ball and there is a cost to that.</p>
<p>There are many senior citizens regularly getting conned out of thousands of dollars every day. If anyone is going to try to transfer money to an elderly relative, make sure they are competent to protect it.</p>
<p>Tell you what, wire all of your 529 money over to me, and I’ll make sure the con-men don’t get it.</p>