<p>My D is going off to college next year and my son is in 7th grade. I have 529 accounts for each that I contribute to monthly. I was shocked to discover that on both the CSS Profile and FAFSA they ask families to give a single figure for all 529 funds held by parents for all children. My son has accrued $2,000 or so in his bank savings account and wants to put it into his "college fund.'' But now I'm hesitant to put it into his 529 as I'm worried that for FA purposes the schools will assume that all the funds can be used for my older child. Seems unfair for the younger one. Anyone got any advice?</p>
<p>All 529 funds held by the parents are treated as parents assets and only a maximum of 5.64% of that value will count, not the 100% value. So, yes it will it affect it a little bit (5.64% of $2000 is about $112.8 at the maximum).</p>
<p>In theory you can use funds in one 529 for another child or even a grandchild. Unless you are making very large monthly contributions, I would not sweat it very much. If you are making very large contributions you could consider the following:</p>
<p>Stop making contributions to your daughter but divert it to your son’s accounts this year, so that he gets twice the contribution. As his will grow tax differed for 4-5 at least, you can be a little more aggressive (I am assuming you are going to be more conservative with your daughters account as she would need the money earlier). Next year do not make a contribution to your son but use that money to pay your daughters fees and draw down on her 529. This will make the year after look a little better and at the same time ensure you are equitable.</p>
<p>Again, unless you have large sums, it may not be worth it.</p>
<p>What mazewanderer says above is correct; parent-owned 529s with children as the beneficiaries are considered a “pool” of money for all children, and so are declared as a parent asset on FAFSA and Profile. However, there’s a different type of account which is a child-owned 529. The accounts are typically set up to receive money transferred from child-owned UTMAs/UGMAs.</p>
<p>If your son has $2000 in his savings account, that’s a child-owned asset, not a parent one. So in theory he can’t move that to a parent-owned 529 because that would entail a change of ownership. Instead, he’d have to open his own child-owned 529 which is owned by him. Child-owned 529s, also known as custodial 529s or UTMA-529s, belong to each child. Sibling accounts (savings/checking/UTMAs/529s) are not reported on FAFSA. What this means is that if your son has a custodial 529, it would not be reported as a parent asset when your older child files FAFSA. </p>
<p>Custodial 529s do not have the same flexibility as parent-owned 529s, in that the beneficiary can’t be changed. So you need to make sure you don’t overfund any one custodial 529 because you can’t move that money to pay for another child’s college. With $2000, that shouldn’t be a problem. You can easily move your son’s money to a 529, and contribute your own funds to it in the future as a gift to him.</p>
<p>Yes that makes sense. So if you want to shelter that $2000, you could open another custodial 529 and put it in there. And if he has a job or something that he earns money, he continue to put money into his custodial account, keeping it separate from your contribution.</p>