<p>We are currently doing visits and crunching numbers for S2, a high school senior. He has ~$12,000 in the UTMA account started for him by his late grandfather. He really likes a small, faith-based LAC where he stands a good chance of being a walk-on in two sports and earning an athletic scholarship after his freshman year. I estimate our AGI for 2013 to be $67,733 including H's and my salaries and H's military pension.
The college itself is fairly generous up front with financial aid based on the NPC. S2 is interested in secondary education and is applying for a TEACH grant, and we qualify for some faith-based aid and a small state grant. However, when I factor in the UTMA money, our EFC goes up $2400, our financial aid goes down and we would have less on hand to pay for him his freshman year (or if he doesn't get an athletic scholarship, or if he decides to take his business elsewhere.) I'm thinking it might be to our advantage to cash out the UTMA (S2 is 18, but I'm custodian until he's 21) and put the money elsewhere. I thought about putting it in my mother's name and have also seen information on CC about transferring it to a 529 account. S1 got mostly merit aid so his UTMA wasn't as big an issue. He's a college senior and still has $7000 left which I hope to pay as a lump sum on his student loan principal. Any thoughts or advice would be most welcome.</p>
<p>
Yes you could transfer your S2’s UTMA account to an 529 account.
See [Should</a> You Open an Ugma/utma 529?](<a href=“What is an UTMA or UGMA Account? - Savingforcollege.com”>What is an UTMA or UGMA Account? - Savingforcollege.com)</p>
<p>
</p>
<p>It’s not your mother’s money; it belongs to your son. Trying to hide the asset this way would be dishonest.</p>
<p>Using the money to open a 529 account would make sense, if you plan to use the funds to pay for qualified education expenses. For FAFSA purposes, student owned assets in a 529 account are assessed at a lower rate than non-529 student owned assets.</p>
<p>I also thought about spending at least some of it down by buying him a laptop and some of his college dorm room supplies before the first of the year. I could also tap it to pay for his SAT/ACT retests and reimburse myself for some of his earlier tests. The money has to be used for his benefit but not necessarily for school expenses … I guess I could buy him a car but my father would haunt me!</p>
<p>As custodian of a UTMA you have a fiduciary duty to spend the funds for your son’s benefit. You can’t move the money to someone else’s name as it is owned by the student and must remain in his name. </p>
<p>You can move the money to a student-owned 529. The move would typically involve a trustee-to-trustee transfer per the terms of the company holding the UTMA. The new 529 would be owned by the student with the parent as custodian. See the article linked above for more details.</p>
<p>Get it done this year, you want his assets to be as low as possible when you file the FAFSA. For that purpose a student owned 529 works, so does a red sports car.</p>
<p>But to clarify, once the student turns 18 (In a state where the maturation age is 18), he or she can withdraw the money and use it for ANYTHING they please, right? A trip, a gift to a sibling, school clothes, etc. </p>
<p>For EFC purposes, money held in your son’s name is penalized more than money held in the parent’s name.</p>
<p>As the custodian, you have control of the money. Nothing prevents you from withdrawing the money and giving it to your son. As an adult, he can spend it as he chooses.</p>
<p>Nothing prevents your son from taking his own money and paying the parent’s rent for room and board. Nothing stops you from taking that money and saving it for his college, or from you giving it to your mother, and she saves it for his college.</p>
<p>If a tree falls in the forest and no one is around to hear it … If you bypass the intermediary steps, who is around to call a foul?</p>
<p>^Yes, he or she can use the money for anything.</p>
<p>
</p>
<p>Actually, there is something that SHOULD prevent this: it’s called fiduciary duty.</p>