<p>My daughter has an UTMA account in her name...if she simply 'gives it away' to a trusted reletive who would then ration it back to her over the duration of my daughter's college career, will the FAFSA simply accept that she no longer has any assets?..or does the FAFSA formula somehow 'know' that we are trying to reduce assets in hopes of reducing efc?</p>
<p>Can you just “give away” a UTMA account?? Hope others respond. I’m not sure of the answer.</p>
<p>Wouldn’t gift tax kick in?</p>
<p>No you can’t give away a UTMA account. If you ever got audited in the next 7 years, the IRS would have a field day with that.</p>
<p>Last year the IRS amended the rules to allow UTMA and UGMA monies to be moved to a custodial 529. This would move the money out of your daughter’s assessment (20%) into your assessment (5.6%). This is probably your best bet.</p>
<p>You could look at some sheltering options which could get it to 0% assessment, but those are more complicated and come with their own set of problems.</p>
<p>^Scott, are you positive about the FAFSA treatment of UTMA 529’s? My impression is that the 529 is still under the UTMA and is still considered a student asset.</p>
<p>OP, you should probably check with your own financial advisor and call the FAFSA help desk for clarification. If your daughter has not reached the age of the UTMA termination I don’t think she can give anything away and the custodian would be violating fiduciary obligations. You might find more guidance here:
[FinAid</a> | Saving for College | UGMA & UTMA Custodial Accounts](<a href=“Your Guide for College Financial Aid - Finaid”>UGMA & UTMA Custodial Accounts - Finaid)</p>
<p>My understanding is that the 529 account would be reported as a parent asset
from [What</a> is your parents’ net worth of current investments?](<a href=“http://www.fafsa.ed.gov/fotw0910/help/fotw43e.htm]What”>http://www.fafsa.ed.gov/fotw0910/help/fotw43e.htm)
</p>
<p>SCM, this is confusing and hopefully one of the FA pros will chime in! Under the same site you referenced, the instructions for question 42 (student assets) are:
</p>
<p>This seems in conflict with the parent asset info - perhaps a loophole not yet closed?</p>
<p>I would think that logically 529’s that fall under the UTMA are not titled to the parent (or custodian). They are titled to the minor with the parent “as custodian for”. I’m pretty sure that once it goes into a UTMA, that heritage follows since UTMA’s are an irrevocable gift. So, the 529 should be titled in the same manner as the UTMA which would make it a custodial account. But there are no guarantees that logic will actually produce the correct answer!</p>
<p>As sk8rmom says, you can move child-owned UTMA/UGMA funds to a 529 account. The 529 account will be owned by the child, unlike most 529 accounts which are owned by the parent and have the child as beneficiary.</p>
<p>Here’s what the 2009-10 FAFSA Application and Verification Guide says:
“Qualified tuition programs (QTPs, also known as section 529 plans because they are
covered in section 529 of the IRS tax code) and Coverdell education savings accounts
are grouped together in the law as qualified education benefits and have the same
treatment: they are an asset of the owner (not the beneficiary because the owner
can change the beneficiary at any time), except when the owner is a dependent stu-
dent, in which case they are an asset of the parent.”</p>
<p>So as scottaa says, moving the money to a 529 is helpful. I like the Ohio 529 plan because it has Vanguard funds (low expenses) and it also offers a straight CD option, where you pick the number of months you want for the duration of the CD.</p>