<p>Where do those numbers come from?</p>
<p>The $15,000 comes from your post #5 in this thread, when you said that you thought you would have about that much saved up when February and FAFSA completion time rolls around. The $3,000 is 20% of $15,000, which is the percentage that non-529 student assets are assessed at for FAFSA purposes. The $840 is approximately 5.64% of $15,000, which is the percentage that parental assets and student-owned 529 assets are assessed at for FAFSA purposes.</p>
<p>Here’s the formula:</p>
<p>[IFAP</a> - EFC Formula Guide](<a href=“http://www.ifap.ed.gov/efcformulaguide/091312EFCFormulaGuide1314.html]IFAP”>http://www.ifap.ed.gov/efcformulaguide/091312EFCFormulaGuide1314.html)</p>
<p>
OP, you should estimate your EFC. There are many EFC calaculators on the Internet, such as <a href=“https://bigfuture.collegeboard.org/pay-for-college/paying-your-share/expected-family-contribution-calculator[/url]”>https://bigfuture.collegeboard.org/pay-for-college/paying-your-share/expected-family-contribution-calculator</a>.</p>
<p>If your parents’ incomes are less than $50,000 (form your post #5), you MAYBE qualify for the the Simplified Needs Test, which ignores both your assets and your parents’ assets in the computation of the Expected Family Contribution (EFC). See <a href=“Part 3: Answers to Readers' Questions on Financial Aid - The New York Times”>Part 3: Answers to Readers' Questions on Financial Aid - The New York Times;
<p>Therefore, if you qualify SNT, your assets will have no impact on your EFC.</p>
<p>quote
“I’m a little shocked to find out I’ll be offered less grant aid because I’ve worked harder during high school”</p>
<p>… I agree, but welcome to life.</p>
<p>See <a href=“http://www.nytimes.com/2013/09/29/magazine/freebies-for-the-rich.html?hp&_r=1&[/url]”>http://www.nytimes.com/2013/09/29/magazine/freebies-for-the-rich.html?hp&_r=1&</a>
It seems the schools reward you if you study harder but not “worked harder during higher school.”</p>
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<p>MiddKid86, I have to question what you’re thinking here. A minor student cannot open up a 529 on his own behalf. The account has to be opened by a parent or other adult. (And I don’t believe a 529 can be opened at all for a student who’s already reached majority.) So, yes, the funds do have to be turned over to an adult who will administer them for the benefit of the student.</p>
<p>And, as for an ethical issues you feel might arise from the transfer of assets from student to parent, I disagree. Funds can generally be transferred freely between parent and minor child, with no tax consequences. Keep in mind that a minor is just that - a minor. He or she is not yet of legal age, so parental control of the minor’s assets is not remarkable.</p>
<p>Technically minors cannot own financial instruments. However, the 529 can be owned by the minor with the parent as custodian. The funds can go directly into the 529 from the minor’s checking account; they don’t need to be given to an adult first. </p>
<p>A 529 can be opened by anyone - student, parent, grandparent, aunt, uncle, etc. It doesn’t matter the age. If the owner is under the age of majority in his or her state, then a custodial account must be opened with a named custodian; the minor is still the owner. If the student is over the age of majority then he or she can open his own 529.</p>
<p>
This kind of 529 is called UTMA/UGMA 529 account. See [Should</a> You Open an Ugma/utma 529?](<a href=“What is an UTMA or UGMA Account? - Savingforcollege.com”>What is an UTMA or UGMA Account? - Savingforcollege.com)</p>
<p>I must say if a relatively humble family with income of $50k/year moves money by changing ownership through gifting to get favorable treatment of the financial aid is considered fraud, and a similar technique employed by a lot of rich folks who move around ownership of money through gift to avoid several times more tax liability is called taking good advantage of tax loop holes then something is really not quite right with this situation.</p>
<p>With that said, how about giving gifts to the grandparents who open up a 529 plan with the child as beneficiary?</p>
<p>Yeah, 4kidsdad that’s exactly right. We followed he strategy of not letting our kids work during the school year and applying all of their time to studying. They did work at jobs during the summer. Our oldest graduated as Valedictorian of his high school and got an almost free ride to Penn. Youngest graduated eighth in his class and went to Lehigh. They got the work experience during the summer. I just don’t think working at minimum wage jobs during the school year is worth giving up being able to do really well in High School and getting a shot to go to a great school. Really good grades will get you in to a good school somewhere. Minimum wage earnings and so-so grades will get you into the local community college. By the way, our income level as parents is so low that our EFC was almost nothing.</p>
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<p>Get ready to feel that way for the rest of your working life, kid. I’m glad you understand how America works. Now back in line, worker.</p>
<p>MiddKid86, I have to question what youre thinking here. A minor student cannot open up a 529 on his own behalf. The account has to be opened by a parent or other adult. (And I don’t believe a 529 can be opened at all for a student whos already reached majority.) So, yes, the funds do have to be turned over to an adult who will administer them for the benefit of the student.</p>
<p>vballmon addresses this nicely. A 529 plan that is opened with assets owned by a minor must be used for that minor’s benefit. An adult will be custodian of the account until the minor owner/beneficiary reaches the age of majority, at which point the owner/beneficiary will take control of the account. A “normal” 529 account (usually opened and funded by a parent or grandparent) is controlled by the account owner who retains ownership of the funds. In that case, the beneficiary can be changed at any time, and the account owner can even name him/herself as beneficiary.</p>
<p>And, as for an ethical issues you feel might arise from the transfer of assets from student to parent, I disagree. Funds can generally be transferred freely between parent and minor child, with no tax consequences. Keep in mind that a minor is just that - a minor. He or she is not yet of legal age, so parental control of the minors assets is not remarkable.</p>
<p>You’re right, parental control of a minor’s assets is not remarkable, but by law, the assets <em>must</em> be used for the benefit of the minor, and they will still count as assets of the minor for financial aid purposes. What was discussed earlier in this thread was a scheme (and I use that word in the worst sense) whereby a minor would make a “gift” of funds to a parent purportedly for assisting with household expenses, with the expectation that the parent sometime in the future make an equivalent contribution to the student’s college cost, all for the purpose of receiving more favorable financial aid treatment for the “gifted” funds. This is unethical, as I hope you can understand.</p>
<p>With that said, how about giving gifts to the grandparents who open up a 529 plan with the child as beneficiary?</p>
<p>If the expectation is that the grandparents will use the “gift” to open up a 529 plan for the benefit of the “gift” giver, than it’s not really a gift in the eyes of the law.</p>
<p>Why not just move the money into a Roth IRA.</p>
<p>Sent from my DROID RAZR using Tapatalk 2</p>
<p>Why not just move the money into a Roth IRA.</p>
<p>This link gives a good overview of the pluses and minuses of what you suggest:</p>
<p>[Using</a> Roth IRA to pay college expenses](<a href=“Bankrate: Guiding you through life's financial journey”>Bankrate: Guiding you through life's financial journey)</p>
<p>I still think that opening a 529 would be the best move.</p>
<p>Agree that transferring the money to your parents, and they report it as their assets, is probably a good idea. You aren’t lying, they are holding it for you.</p>
<p>I used the money I earned in summers in HS and college after I graduated college, to get a car and pay a downpayment on an apartment.</p>
<p>In a more general sense, would I as a parent or my son as a student have to report all of our “pocket money” lying around? We have about a thousand worth of savings bonds for each of our kids for example, but they are in our possession and our children cannot access them. Are they our assets or their assets?</p>
<p>Agree that transferring the money to your parents, and they report it as their assets, is probably a good idea. You aren’t lying, they are holding it for you.</p>
<p>No, not a good idea. Just because parents might be “holding” the money does not turn it into their asset. If you hand me your expensive watch to “hold” for you while you go swimming, does that mean that it belongs to me? I didn’t think so.</p>
<p>In a more general sense, would I as a parent or my son as a student have to report all of our “pocket money” lying around? We have about a thousand worth of savings bonds for each of our kids for example, but they are in our possession and our children cannot access them. Are they our assets or their assets?</p>
<p>Do you consider savings bonds that are in your possession to be “pocket money” lying around? I would think that savings bonds are assets that need to be reported. Whether they are assets of the parent or of the child depends on the circumstances. Just because assets may be in the possession of the parent and the child does not have access does not mean that the assets do not belong to the child. The parent could be a custodian under a UGMA/UTMA arrangement, or the parent could be acting as a trustee in a situation where the child is a trust beneficiary. In either case, the parent has a fiduciary responsibility to the child, and the child must be given access and control upon reaching the age of majority in the case of a UGMA/UTMA arrangement, or in the case of a trust in accordance with the trust document.</p>
<p>There have been cases of children suing their parents who violated their fiduciary duty. Extreme, yes, but it can happen. Moving money from a child’s account to a parent’s is not something frivolous; there are IRS and state guidelines about what is acceptable.</p>
<p>As far as the savings bonds, yes they must be reported as an asset of the owner. The good news is that they can be redeemed with no tax due on the interest if they’re used for education. The bad news is that the bonds need to be registered in the parent’s name. The student can be listed as a beneficiary on the bond, but not as a co-owner for tax-free redemption.</p>
<p>It is not “holding” if the money is given and belongs to the parents after the gift in a legal account that the kid has no access to. It is legal for parents to pay for student’s educational cost. The kid is fully vested in the risk of losing the money and will have no recourse if the parents elect to not spend it on anything that benefits the child. Any lawyer here that can clarify this?</p>
<p>Here’s is one advice from the college data website (see Transferring Assets section):</p>
<p><a href=“http://www.collegedata.com/cs/content/content_payarticle_tmpl.jhtml?articleId=10089[/url]”>http://www.collegedata.com/cs/content/content_payarticle_tmpl.jhtml?articleId=10089</a></p>
<p>*It is not “holding” if the money is given and belongs to the parents after the gift in a legal account that the kid has no access to. It is legal for parents to pay for student’s educational cost. The kid is fully vested in the risk of losing the money and will have no recourse if the parents elect to not spend it on anything that benefits the child. Any lawyer here that can clarify this?</p>
<p>Here’s is one advice from the college data website (see Transferring Assets section):</p>
<p><a href=“http://www.collegedata.com/cs/conten...rticleId=10089[/url][/I]”>http://www.collegedata.com/cs/conten...rticleId=10089*</a></p>
<p>Yes, if the student/child makes a bonafide gift to the parent, giving up complete dominion with no expectation of future benefit from the funds gifted, then the money gifted becomes an asset of the parent. But really, do you think that in the real world this is a common occurrence?</p>
<p>The website at the link you provided says that trust money and money in custodial accounts <em>cannot</em> be transferred from child to parent. A 529 account opened with custodial money remains the property of the child.</p>