<p>For the FAFSA inquiries regarding checking/savings accounts, would it be legal for me to simply move money into my parents accounts for the purpose of filing my FAFSA so that I do not have to report the amount in my checking and savings, as it is relatively substantial? I am an independent, as defined by FAFSA, so my parents' information is not required for filing it out.</p>
<p>[EDIT] I apologize if this has been asked already, but I am new here and haven't really gotten navigating the forums down yet.</p>
<p>You could probably do that but it would be dishonest and when you are independent as defined by FAFSA if you show no money in your accounts they are going to question how you are paying your living expenses.</p>
<p>Well, I wouldn’t transfer everything, as you’re right, I do need some money to live off of. I just wanted to lower the amount of money under my name for financial aid consideration.</p>
<p>I have read recommendations saying to move savings and such that are under the student’s name over to the parents’ name. I just wasn’t sure if that was still a legitimate strategy for independent students.</p>
<p>If you “move” the money into your parents’ account, it’s no longer your money. You are giving it to them, and they will have no obligation to give it back.</p>
<p>Any agreement you have to the contrary with them would constitute fraud.</p>
<p>The recommendations you’ve read generally deal with the parents’ money and how it is saved, as many parents had put money in UTMA accounts for their minor children in an attempt to save on taxes. It doesn’t involve changing the actual ownership of the funds.</p>
<p>Agree with Chedva. What I was saying (to clarify) was that if you declare yourself independent for FAFSA you are supposed to show ALL your own money and if you move it around, FA officers may question how you are supporting yourself and whether you really are independent.</p>
<p>The value of all assets (cash, investments, etc) are reported as of the date FAFSA is begun. FAFSA is not available online until January 1. The standard advice is to pay off debt, property taxes, other expenses prior to starting FAFSA, where possible and practical. There’s time in January (and often February) to do that.</p>
<p>The IRS gift exclusion for 2009 is $13,000 per person, by the way. This is the amount that any one person can give to a non-spouse in any one year without incurring a gift tax.</p>
<p>Why is this (moving assests to parents accounts) considered dishonest? Why is it any different than other FAFSA strategies discussed and considered on this forum? If I move assets from son’s account to parents account 5 years ago (which we did for FAFSA planning purposes) do you really consider it dishonest? What if the account was moved 15 years ago?</p>
<p>Is it dishonest to tell grandparents to give money to parents rather than the son for college fund for FAFSA purposes?</p>
<p>Should there be no attempt at all to leverage and reduce your EFC? </p>
<p>Many tax professionals discuss deferring income for tax purposes and lumping medical and charitable expenses for the current year. Is that dishonest? </p>
<p>Why not use the same planning strategies to increase FAFSA? As an example, why not defer income (especially if you own a business with less than 100 employees?) to reduce your EFC? Is that dishonest?</p>
<p>I’m in the camp of doing research and making financial plans that are most advantageous to my particular tax and financial aid situation. In the course of financial planning, I believe it’s ethical to investigate the ways to reduce FAFSA and put those into effect, where legal. Having the grandparents set up their own college fund for the benefit of the grandchildren (rather than giving money to the parents and/or child) definitely falls into the legal and ethical category of smart financial planning.</p>
<p>However, money that is in a custodial (UGMA) account legally belongs to the child, not the custodian. It is an irrevocable gift to the child. When the child is under 18 (or 21, depending on the state), money in the child’s custodial accounts must legally be used for the benefit of the child. The child cannot simply gift this money to someone else. </p>
<p>When you moved money from your minor son’s custodial account to your own account, yes, that was illegal unless you immediately spent it on something that met the child’s legitimate needs. I’ve read of a court case where the child sued the parent for having withdrawn from the UGMA while the child was still a minor. The money was spent on parent expenses and the child sued to recover the funds. I think this was in Colorado but don’t have the link handy.</p>
<p>There’s a legal way to gain the same result of removing these UGMA assets from the child’s portion of FAFSA, by the way. </p>
<p>The original poster seems to be 24 and/or fits the criteria for independent students. If that’s the case, he or she can give money to anyone he/she wants (up to the IRS limits). This is a legal gift; whether it’s ethical depends on the intent. I don’t generally second-guess intents; it’s a judgment call and can been seen in many different ways by well-meaning people. But make no mistake; a gift is a gift. That money should be considered gone by the gift-er.</p>
<p>Money was put into our son’s account 10 years ago (pre unaware of FAFSA) for COLLEGE and specific purpose was for college (We are talking 1,000 dollars here). </p>
<p>The money was for college. Because we didn’t know FAFSA laws 10 years we put it into his account. We moved it to our account five years ago. (when I started reading up on FAFSA)</p>
<p>You’re telling me this is illegal? But If HE spends the 1,000 dollars on school clothes and spending money (instead of getting an allowance) for five years and I replenish OUR account with the 1,000 dollars then it isn’t illegal?</p>
<p>That’s right, ohiopublic. Once you put YOUR money into a UTMA account, it is no longer YOUR money. It is your son’s money, and you are the trustee. If you then take that money and put it back in YOUR account, you are taking HIS money. It would be the same as if you took his paycheck and put it in your account.</p>
<p>The FAFSA strategies that we read about deal with the question of where parents should put their own money - do we keep it our name or put it into a UTMA? The planning comes before the money is invested. Once it’s in the kid’s name, it’s too late. However, if you do in fact spend the funds for the kid’s benefit, it’s unlikely that you will ever be held accountable for moving the money.</p>
<p>It is not dishonest for grandparents to give money to the parents rather than the child; it’s the grandparents’ money to do with as they wish. But once they give it to the parents, they can’t demand it back if the kid decides not to go to college, or gets a full ride, or whatever.</p>
<p>The OP’s situation is different; apparently that money that he wants to move was never the parents’. The OP does not intend that money be used for his parents’ benefit. The sole purpose of the move is to avoid having it in his name for FAFSA purposes. And then he intends to get it back.</p>
<p>Money in a UGMA is an irrevocable gift to your son. Different states have different laws regarding how the money can be used. At the federal level, nonqualified withdrawals are to be reported on the parents’ tax return, so they’re also taxed at the parents’ rate.</p>
<p>Here’s a blurb from an article I found - the tax advice in the article is out of date so I won’t post the link, but it’s an example of qualified withdrawals:</p>
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</p>
<p>The legal way to get that $1000 out of the student asset bucket for FAFSA purposes is to transfer it to a UGMA/529. The title remains in the child’s name as it’s still owned by the child, but for FAFSA purposes it’s treated as a parent asset (and assessed at the parent rate).</p>
<p>I always wonder where people who think it’s just fine to play with assets think the money comes from to pay their kid’s way through college. You’re just shifting the responsibility to honest tax payers to pay your child’s bill.</p>
<p>I wonder why people go through the hassle of doing sham transfers back and forth? Why not just make up the numbers? You’d be busted either way.</p>
<p>Why? If a college or the DoE got interested enough to investigate, it would not stop at looking at the balance the day the FAFSA was filed, it would look at all transfers in and out for months before and after. Fraud Investigation 101.</p>
<p>So am I dishonest taxpayer when I made it a point to double up my charity expenses in December (vs. giving my budgeted amount in Jan 10) and prepayed January’s mortgage in December to lower my taxes? Am I shifting responsibility to honest taxpayers to pay this country’s bills? </p>
<p>Back to FAFSA—are you saying that I should make it a point to be “blind” to any FAFSA planning whatsoever and that any FAFSA planning is dishonest and should be viewed as shifting my child’s education bill to the taxpayer?</p>
<p>Yes, IMO it is. You have the money but want tax payers and those donating to colleges to pay your child’s way through college.</p>
<p>What ever happened to the satisfaction derived from being able to give your children a good education? My parents couldn’t write those checks and I’m thankful for the aid I got. I’m also thankful that I worked hard and can write the check. But really, I don’t want to put you’re kid through college while you sit on deferred income.</p>
<p>They money doesn’t fall from the sky, you’re talking about money my classmates and I donate to our alma mater so kids who really need the money can attend.</p>