<p>I know that parental assets invested in annuities do not count for purposes of the FAFSA. Does the same rule apply to assets in the namen of the student?</p>
<p>WOW Good question. Do you think an annuity is considered as an investment? A parental annuity does not count as a parental asset, agreed. By the same token, it generates taxable income while it is paying out correct?</p>
<p>That is correct.</p>
<p>I'm not sure an annuity is the best investment vehicle for a students $$....since most annuities are supposed to be "retirement" money, there may be a penalty for early withdrawal. Check with the insurance company first before making any investment.</p>
<p>If you're looking to save for the student for something other than college, why don't you think about a trust account?</p>
<p>Just my $0.02.</p>
<p>I understand about the complexities associated with annuities. Nonetheless, for all of us who have children on the way to college in a few years, FAFSA issues must loom large in any decisions about where to put money. In this case, the money is already in the child's name; the question is whether I can do anything to minimize the financial aid impact without spending it outright.</p>
<p>There is a penalty for early withdrawal. The deferred aspect does render the treatment of distributions just like any retirement account, excluding a Roth IRA. Check with your accountant, but they usually don't make much sense for college savings.</p>
<p>Trust accounts for the benefit of the student are considered student savings by the FAFSA people :)</p>
<p>I dunno, my head is starting to hurt again!!</p>
<p>I blew it by not having an old UTMA moved over into a 529, or even a UTMA/529 years ago. OH well, if thats the most costly mistake I make for the rest of my life, I could live with that!</p>
<p>UGMA's and UTMA's are considered in FA. It not only asks for the students value but the value of all other sibs accounts. I will have to check and see if that is for FASFA or Profile/IDOC</p>
<p>We took a dist from the UGMA's. Absolutely NO SENSE in leaving an asset in the kids name to get smacked by what...25%???</p>
<p>And in case anyone is concerned, the monies were (and are being) used for the benefit of the children.</p>
<p>But to get back to your initial question and my initial answer. There does not seem to be any such stipulation of an annuity for the student to NOT be included, so if it is an asset (which I think we all agree it is), and it is in the students name....it probably needs to be reported on FAFSA. Probably at todays value.</p>
<p>There just doesnt seem to be too many ways around hiding student assets. And I don''t mean HIDING, I really mean minimizing EFC by any creative means of asset allocation (ha I'm not even an accountant!).</p>
<p>From another site it was mentioned that a 529 wrapped inside a UTMA would be invisible to FAFSA, (unreported). I think that is a technicality, and while fafsa doesn't specifically reference UTMA 529....My opinion is that it is a student asset, and as such should probably be reported. Again, what is the gov't scrutiny level??</p>
<p>End of the day, Dept of Ed does seem to penalize middle classers that have scrimped and managed to put aside some cash for their kids college. Another example of the middle class carrying the majority of the Tax Burdenthis case a "lack of Federal aid" which might as well be a tax)</p>
<p>The FAFSA instructions specifically state that you don't have to report a student-owned 529 account. </p>
<p>
[quote]
If you are reporting parental information and you own a qualified educational benefit plan – do not report the value of those plans.
[/quote]
</p>
<p>(emphasis in original). All assets held in UTMA are considered student-owned, since the beneficiary (the student) cannot be changed. Therefore, it is correct that a 529 held as a UTMA is not reported on FAFSA.</p>
<p>I must be missing something, pjp1116. The instructions for questions 43-45 list "annuities" under retirement plans.</p>
<p>Chedva:</p>
<p>To me, the language that you quote says only that the plan should not be reported as a PARENTAL asset. It seems to me that you would then be stuck with reporting the assests in the plan as a STUDENT asset--the worst of all possible worlds.</p>
<p>That may be a reasonable interpretation, but every college FA officer I've spoken to, at seminars and elsewhere, say that a 529 owned by the student is not reportable.</p>
<p>I also may not have quoted enough of the instructions. The first paragraph says,
[quote]
If you are reporting parental information and your parents own a qualified educational benefit plan, or education savings accounts – including "529" college savings plans and Coverdell savings accounts - report the current balance of the plan as a parent asset (Q88). The amount to be reported for a state prepaid tuition plan is the "refund value" of the plan.
[/quote]
</p>
<p>(emphasis in original).</p>
<p>Taking the two together says that if your parents own it, report it. If you own it, don't report it.</p>
<p>The parent, or purchaser, always owns the 529 plan since the beneficiary can be changed at any time. It is, therefore, an asset of the parent if owned by a parent and must be reported. best way around it, have grandma or grandpa buy he 529 plan.</p>
<p>
[quote]
The parent, or purchaser, always owns the 529 plan
[/quote]
</p>
<p>That's not true. You can have a 529 that is a UTMA, in which case it is owned by the student and the beneficiary cannot be changed. This account is not reported on the FAFSA. (Of course, it is reported on the Profile, so for schools that use the Profile or other institutional method, it is considered an asset of the student and "taxed" at the student rate.)</p>
<p>I didn't report our 529 on the fafsa, accountant said not too...but I did mention we had one on the schools profile they sent us. My son doesn't have a large amount of money, but he might just put 500-1000 in an IRA account, but without the thought of taking it out. (let him be smarter than I in that area)I did spot one sign at the bank the other day that had lower interest but send "no penalty withdrawal" for an IRA. I didn't read the fine print yet but that type might be a better deal for a college age student right now.</p>
<p>One thing I can tell you...you cannot put money in an annuity in excess of what the person earns in a year. We looked into this for our kids...and TSA shelter money that is earned from taxes. We were told...nothing in excess of the kid's earnings.</p>
<p>thumper1:</p>
<p>Are you saying that one cannot spend more to purchase an annuity then one earns in a year?</p>
<br>
<blockquote> <p>thumper1:Are you saying that one cannot spend more to purchase an annuity then one earns in a year?>></p> </blockquote>
<br>
<p>That is what I was told...I think. We wanted to start "retirement accounts" for our kiddos, and we were told that the amount contributed in a year could not exceed what the child earned. BUT maybe this was not an annuity. Can't imagine what it would have been, however. I hope someone with more investment knowledge than I have can answer this. In addition, there are also yearly limits on the amounts one can contribute anyway to an annuity or IRA.</p>