<p>Hello All,
As we get ready to fill out our first FAFSA we'd like to make sure we report our various assets in the proper spots. Mutual funds, etc. seem fairly self-explanatory but the accounts we have set up for our children are where we have some questions.</p>
<pre><code> We have 3 children, and over the years we have set up Custodial Savings accounts, Custodial UGMA accounts, and 529 MESP (Michigan Educational Savings Program) accounts for each of them. The UGMA accounts also show a 529 designation, but I believe they're based in Nevada and as Michigan residents we do not get a tax benefit for any contributions to them.
When it comes time to fill out the FAFSA, do we report Custodial accounts as Parental Assets or Student Assets? If custodial accounts report as student assets, should we consider moving the money from our "soon to be collegiate" daughter's savings account into the 529 account prior to 1 Jan? If I understand correctly (which is a HUGE stretch) different types of assets are "protected" differently when it comes to calculating EFC. Any clarification, advice, etc. would be much appreciated.
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<p>Any custodial accounts must be reported as the student’s asset on FAFSA. 529 accounts are reported as parent assets.</p>
<p>Students have no asset protection and 20% of student assets go to the EFC. Parents have some asset protection, based on the number of parents and the age of the older parent. Over that amount around 5.6% goes to the EFC.</p>
<p>The exception is if the family qualifies for one of the simplified EFC calculations such as simplified needs or auto 0 EFC. These require low incomes (under $50,000 ore $31,000 respectively) and meeting some other criteria. In those situations assets will have no impact.</p>
<p>swimcatsmom…Thanks for the clarification. I’m assuming that means the savings accounts we have for our other 2 children don’t need to be reported as parental assets then? We’re not trying to scam the system by any stretch, but we also don’t want to penalize our daughter because we set up a savings account for her. There’s not a huge amount in the account ($6K or so) but it wasn’t our intention to use that money for college. We had intended for it to be her to have when she eventually is done with college and out on her own. Should we consider moving that money, possibly into our savings account so it contributes less to EFC?</p>
<p>It might not make much difference where you put it. Much depends on your income/assets/family situation. What is your EFC? If you are looking at UM, you will need a pretty low EFC to get any need-based grants, so you are probably just talking about loans, anyway. If the EFC is lowish but too high for grants, you’ll get the full sub, anyway, most likely. If the EFC is in the high teens, you might just get unsub loans. It really all depends on the EFC, to be perfectly honest.</p>
Are saying that the UGMAs are currently held within a 529 plan? If so, they are treated as parent assets even though they are technically owned by the child.</p>
<p>If not, you can roll the UGMAs into a 529 UGMA to gain the benefit of having them be treated as parent assets. Google “529 UGMA”, there are many sites that go into a lot of detail about this. There may be tax consequences to converting which you will have to take into account.</p>
<p>The state where your 529 plan is held has no bearing on the FAFSA.</p>
<p>kelsmom…We don’t know for sure what our EFC will be but I don’t really expect D1 will qualify for any need-based aid. AGI will be around $90K (around $50K from current job and $40K from military pension) and we have average savings and investments. Regardless of what our EFC turns out to be, we’d just like to get the FAFSA as correct as possible so we have a good basis for each yearly update. I suppose it’s possible that we might get a pleasant surprise once all is said and done…but we’re not expecting one.</p>
<p>notrichenough…The UGMA accounts are listed as College Savings Plan (529) - UGMA on our bank’s website. The accounts contain securities issued by the Nevada College Savings Trust Fund so we don’t get any state tax benefits for the contributions we made.</p>
<p>With parental assets and student assets being weighted differently in the computation of EFC, is it advantageous to not have regular savings accounts for your kids? I’m not saying completely in lieu of 529’s, but it will kinda stink if our EFC comes out higher because we opted to open non-college accounts for our kids.</p>
These are counted as parent assets then, and you are only “assessed” 5.6% after your asset protection allowance. If it was counted as a child asset, you would be assessed 20% with no asset protection.</p>
<p>Will this make a difference? As kelsmom pointed out, it will depend on your situation and the FA likely to be offered by the school.</p>
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In general, yes, and for other reasons besides FA (mainly control of the asset).</p>
<p>One strategy is to spend down the kids’ non-529 money before you fill out the FAFSA. Did you send them to summer camp last summer? Reimburse yourself out of the kid’s account. Do they need a laptop? Are you going to get them a car? A musical instrument? Do they play sports? Buy/pay for all this stuff using the kid’s account before you fill out the FAFSA. Pretty much any expense that benefits the kid can be used.</p>
<p>notrichenough…Thanks again for the info. What we may do is try to find a happy medium with the money in her savings account. We can probably look at getting some college essentials like a laptop early and use those funds, and transfer the rest into a “parental” asset account (either her MESP 529 or our savings account) so it doesn’t have as big of an impact on EFC.</p>
<p>Do we still need to list the MESP 529 accounts for D2 and S as parental assets on D1’s FAFSA? If so, I wonder what the point is in naming a beneficiary for those 529’s in the first place? Money we’re trying to save specifically for a different child’s education is counted (even partially) towards what we’re expected to pay towards D1’s education? I’m starting to think FAFSA is actually a cleverly disguised 4 letter word. :)</p>
Putting it in your own account is not actually legal, because it’s your kid’s money, you can’t just decide to give it to yourself or take it back. I imagine there’s little chance you will get caught, or that your kid will sue you someday if they find out you stole their money, but there it is.</p>
<p>Not sure how it is counted if it goes into a 529 owned by the child that is not wrapped around an UGMA.
I think with 529’s, the beneficiary can be changed at any time, so everyone would just change the beneficiary to the kid (or someone else) not in college and get a reduction in EFC, and then switch it back to use for college expenses.</p>
<p>529 college savings plans of siblings are reported as assets of the parent if the parent is the account owner. Are your MESP 529s owned by the parent with the children as beneficiaries, or are they owned by the children with the parent as custodian? If the latter, then the sibling 529s would not be reported.</p>
<p>The main difference in how 529s can be titled, and therefore in how they’re reported on FAFSA, is if the 529 is owned by the parent or the child. Parent and student-owned 529s are reported, while sibling-owned 529s are not. An example of a sibling-owned 529 would be your Nevada plans which are titled as UGMA-529s, based on how you’ve described them.</p>
<p>You can change the beneficiary of parent-owned 529s from one child to another, so I think the logic (if there is any) would be that parent-owned 529s are a pool of money that can be used for any child, not just the currently-named beneficiary. Child-owned UGMA-529s cannot be transferred to another child.</p>
<p>Now I know why alcohol is so popular among parents of college students!! Hopefully D1’s strong stats will lead to a great financial package from one of her top schools and how much and where we arrange the accounts won’t be as critical. U of Michigan and Ohio State both have GREAT merit scholarships which she’ll hopefully be competitive for. Unfortunately most of that won’t sort itself out until March or April of next year. Not sure how all of you handled the stress so well…but God bless you!!!</p>
<p>vballmom…Thanks much, that’s great news!! Our MESP 529’s and 529 UGMA’s are all titled in the kid’s names with us as custodians. While none of the accounts have huge amounts of money in them, every little bit we don’t have to list makes a little difference. :)</p>
<p>You may want to try using the EFC calculator on the college board site to estimate your EFC. It gives a detail page that shows where the money is expected to come from.
Good luck!</p>
<p>MAMom…We ran the EFC calculator estimating the numbers as best we could figure and came up with an EFC around $24K. As I’m sure many others have, I found that to be quite amusing. I know it’s not “technically” what the family is expected to provide each year, but the only way we could possibly swing that is to tell D2 and S that their college options are limited to Clown College or Burger U. D1’s stats have qualified her for some guaranteed money at both U of Minnesota and Ferris State already, so we at least have those as fall-back positions…albeit nowhere near the full-ride she qualifies for at Alabama and a few other southern schools. We’ll still hold out hope for the big scholarships at U of Michigan and Ohio State and see how the cards play out.</p>