<p>Grandparents are moving money from a trust to a student owned 529 plan. Ive called the Profile & 1 college. Both indicate that student owned 529 plans are to be put as a parent asset. We are aware some of the schools have supplemental questions where she will declare this as a gift. </p>
<p>How do we complete the student assets portion that asks if you expect to receive money from relatives? We dont want the money to be calculated twice. Do we just write in the special circumstances paragraph that the student owned 529 plan is a gift from a relative??</p>
<p>Finally, the 529 is probably enough to cover the first year of college and we will spend it first and use parent savings for future years. The profile asks the amount your parents will be able to pay for 2012. Should we write 0 or what our EFC is?</p>
<p>The value of the 529 plan in a student’s name is declared as a parent asset. This is good, since parent assets are protected better than student assets in the EFC formula. The student does NOT have to claim the 529 as a gift … not for FAFSA, not for Profile, and not for any other reasons. It is a 529, and it is a parent asset for aid purposes … so it is not technically a gift to the student.</p>
<p>And as for what to put for what you will pay, I think the consensus is that it doesn’t matter what you put. I don’t know why they ask the question! You will be expected to pay whatever the school determines you should pay, so your answer is irrelevant. But … the amount you think you will pay would be including the 529 (which is a parent resource used to pay tuition).</p>
<p>Always include the 529 as a parent asset. If the grandparents are interested in making additional contributions to the 529, consider setting up a Freshman Fund gift registry, makes additional contributions to your 529 easy.</p>
<p>kelsmom - just a quick follow-up question on this. </p>
<p>As OP indicated, this question does not show up as one of the “standard” CSS questions on the profile under either student or parent assets, but only as a supplemental question that some schools require. </p>
<p>Here’s the question:
“SQ521: Enter the total value of assets held in Section 529 college savings plans that were established for the student by someone other than the student’s parent(s).”</p>
<p>I know that a student’s 529 plans held in their name by a parent are considered parent assets and assessed as such, but it’s not clear to me in anything I’ve read how schools will assess assets with this question for grandparent or other “3rd party” assets. I know that it’s not assessed as a student asset (20% FM, 25% IM), but I haven’t found any information on whether schools assess it at the 5% parent rate, or something else. Do you have any more detail on information or sources that show that grandparent 529’s are also assessed as parent assets.</p>
<p>How Profile schools use this info is a mystery … it varies by school. What I DO know is that the student will have to report the disbursement from the grandparents’ 529 as “other money received by the student.” This will be reported on both the FAFSA & the Profile, and the payment is treated like untaxed income in the EFC formula.</p>
<p>For FAFSA purposes, a 529 held by anyone other than the student or parent is not reported at all … although as noted above, the distribution that is used to pay for school IS reported.</p>
<p>kelsmom:
Since the FAFSA we fill out for Freshman Class of 2012 is based on last year’s financials, in this case, if the grandparents do not disburse until after the new year then none of those monies needs to be accounted for as income, gift, or anything else.</p>
<p>This is my 4th year with FAFSA for my other child and we never get any aid, but doing FAFSA allows potential work study opportunities, so I do the “exercise in futility” every year. This year I will have TWO, joy! When we hired our college financial experts we were advised to get all monies out of our children’s names as any money they have saved in bonds, 529’s, bank accounts, or legal settlements works against them at a higher rate than if in the parent’s name…I think it was 3/4 in the kid’s names and 1/2 if in parent’s names. Also, that if you are paying taxes on the monies, they need to be claimed. In that same vein, if an outside family member has an account for you and is paying taxes on it, then it doesn’t have to be claimed on FAFSA.</p>
<p>The real financial planning needs to begin earlier than senior year if there is any hope for need based aid, and honestly, most people won’t qualify for it anyway.</p>
<p>If your experts told you to move money out of your children’s 529s then they were mistaken. All 529s, whether parent-owned or child-owned, are assessed at the rate of 5.6% which is the parent rate for FAFSA assets. For comparison, child-owned bank accounts are assessed at the rate of 20% for FAFSA.</p>
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<p>It depends on whether the account is under the relative’s SSN or the child’s. Even if they’re paying taxes on dividends and capital gains, if the account is owned by the child with the child’s SSN, it must be reported on FAFSA. For example, if a grandparent sets up a UTMA as custodian with the child as a beneficiary, the child’s SSN would be on the account and the child must report this on FAFSA, regardless of who is paying taxes.</p>
<p>Actually, until just a few years ago, 529’s in the student’s name were counted in student assets. Since this post-er has an older child, it is possible that the information given was correct at the time. </p>
<p>It is correct that the distributions from a relative’s account won’t be on the FAFSA until the 2nd year. It may or may not have the effect of reducing aid in the second year. It depends on the financial situation as well as the school’s policies (for example, some private schools will continue to give the same aid even if EFC increases … ).</p>