<p>I realized I've made a mistake opening a UTMA account for my daughter and I would like to close the account. She is a Junior in High School and her brother currently attends college. Can I pay my son's tuition by using my daughter's UTMA account instead of using my cash account? Obviously, I would keep the cash in my name for her when she attends college. Thanks.</p>
<p>You are legally bound to spend those funds on your daughter’s behalf but college is not the only eligible expense. We applied ours towards camps and music lessons and other enrichment related expenses. Even travel. Check with an accountant asap. I think there may be some stipulation that you somehow divest them before two years from when she starts college otherwise there is an issue. I dont remember what exactly. I just know that we have figured out UTMA/UGMAs are not for us because the more dedicated funds in a kids name, the more is considered available for that child’s college expenses when you are applying for financial aid.</p>
<p>Thanks, I will do that instead!</p>
<p>Make sure to get a legal opinion on what are considered acceptable expenses. Things are tighter these days. Don’t know if what we did meets the standards today.</p>
<p>Kaye Thomas has some good information here:
[What</a> Expenditures Are Proper?](<a href=“http://fairmark.com/custacct/spend.htm]What”>http://fairmark.com/custacct/spend.htm)
[Custodial</a> Account Used for Support](<a href=“http://fairmark.com/custacct/support.htm]Custodial”>http://fairmark.com/custacct/support.htm)</p>
<p>Another option:</p>
<p>Transfer from the UTMA account to an UTMA 529 account.</p>
<p>You would want to do it in the Fall of your D’s junior year, so that any capital gains will not included in the financial aid calculation.</p>
<p>is the utma 529 treated like any other 529 in fin aid calculations?</p>
<p>also, why would it need to be done in the fall of junior year? I thought as long as it was done before the end of the tax year 12/31, so capital gains weren’t on the tax return used on FAFSA the following year</p>
<p>UTMA 529s are reported as parent assets even though they are owned by the student. As a parent asset, they are assessed at the rate of 5.6% for FAFSA vs 20% for other student-owned assets.</p>
<p>The general idea is that any discretionary financial actions that will increase taxable income or AGI should be done prior to the base reporting year for financial aid. The spring of the student’s junior year + the fall of the senior year would typically be the student’s base year for financial aid. FAFSA is filed starting January 1 using the prior year’s income.</p>
<p>Thanks for your help vballmom!</p>
<p>Sent from my MB865 using CC</p>
<p>
If your goal is to minimize the student contribution from assets on the financial aid forms, you can transfer the UTMA into a custodial 529 plan, which will be counted as a parent asset even though legally owned by the child.</p>
<p>I’ll also point out that there really isn’t anyone who watches what happens to money taken from an UTMA AFAIK, to insure that it is used for the child’s benefit. So unless you are worried about your daughter suing you in a few years, the reality is that as long as the taxes get paid to keep the IRS happy, you can do whatever you want.</p>
<p>If the money in there came from you, I wouldn’t lose sleep over the technicalities of ownership since you will ultimately be spending far more on her college tuition. Yes I know this would technically not be legal, but that is my feeling. If the money came from someone else I would feel obligated to be a little more proper about it.</p>