<p>On another thread it was stated: "There are two relevant scenarios for reporting or not reporting this 529. #1 Assets that are owned by the student must be reported on FAFSA, regardless of who the custodian of the account is. #2 Assets that have the student as beneficiary but that are owned by anyone else besides the custodial parent are not reported on FAFSA." </p>
<p>I didn't want to hijack that thread, so I thought I'd post my question here. My wife and I own a 529 account for each of two children. If the 529s were actually "owned" by a grandparent, for example, it sounds like they would not need to be claimed on FAFSA. My questions are: 1) is my interpretation correct? and 2) is it possible to transfer the 529 to a grandparent, or someone else?</p>
<p>What kind of schools will your kids be applying to? If the schools don’t meet need, then these financial gymnastics may not make a difference - especially if your incomes are strong. </p>
<p>Most schools are FAFSA-only schools and don’t have much non-gov’t money to give away. Lowish income people qualify for federal grants. </p>
<p>You need to do some calculating…unless your children will be attending the schools that “meet need” and your income isn’t that high, this may all be for naught.</p>
<p>Family contribution is based MOSTLY on income, so your income may be too high anyway. </p>
<p>FAFSA EFC tends to be about (roughly) 23% of your income. If your income is over $100k, then EFC can be as much as 33%.</p>
<p>Also…I think that if the grandparents get this 529 and use it towards your kids’ education, then those contributions have to be declared.</p>
<p>mom…thanks for the reply to this and other post. My older son will graduate in 2013, so I’m really at the beginning of the process. He does not have a detailed list of prospective colleges yet. Is there an easy way to figure out which schools are FAFSA vs. CSS (I guess I could google it)?</p>
<p>@jroback - Not sure if you know this already, but since you seem to be especially concerned about assets –
A portion of parental assets are protected, i.e. not considered in the FAFSA formula.
The amount varies by age of the older parent and marital status. For a married couple in their 40s it is around $50k. </p>
<p>For assets beyond that (not including equity in the primary residence, money in qualified retirement accounts or the value of small family owned businesses) the FAFSA formula adds about 5% of their value to the EFC. So if you had $100,000 sitting in your checking account FAFSA would assess $2,500 (assuming you are married 40 somethings).</p>
<p>It may not be worth a lot of financial gymnastics to move assets around.</p>
<p>As I’ve pointed out on previous threads, some CSS schools will ask a specific question about whether a 529 has been opened in a student’s name from someone other than the student or the parent. So, in those cases, moving $$ to a gradparent owned 529 will do you no good.</p>
<p>Also … once it is time to use the distributions for college, any distributions from a grandparent must be claimed as other money on the STUDENT’S side of the FAFSA on the next year’s FAFSA. With the parent protection allowances, it is usually better to leave it as an asset instead of money a student receives.</p>
<p>I think another consideration would be that you’d have to pay a penalty to take assets out of the 529 in order to give them to the grandparents. Depending on the amount transferred, gift taxes could also be a factor (in addition to kelsmom note on how it will affect the student’s FAFSA the following year).</p>
<p>Make sure you work throught the EFC Formula Guide that happymom linked to before you do anything else. It will give you a realistic idea of your EFC and what is contributing to that.</p>
<p>And remember…EFC is LARGELY based on your income. If that is on the high side, all of your moving around of money will not really make much difference.</p>
<p>Many people with good incomes find that these financial gymnastics do NOTHING to help them with aid since most schools don’t give much aid and/or their EFC is too high based on income alone.</p>
<p>* My older son will graduate in 2013, so I’m really at the beginning of the process. He does not have a detailed list of prospective colleges yet.*</p>
<p>Well, do you think your son has the stats/desires for a top school like an ivy league school? </p>
<p>Or, is he a “good student” who would likely go to a state flagship or mid-level private? </p>
<p>How did your son do on the PSAT? Is he a likely NMSF?</p>
<p>If you’re concerned that you’ll be expected to pay more than you can afford to pay, then you need to look for schools that will give your child merit scholarships for your stats.</p>
<p>Frankly, if you’ve saved enough to pay off your mortgage, then likely you earn too much to qualify for much/any aid.</p>