DD1 has a full tuition scholarship, and does not, and would not, qualify for any financial aid because of scholarship. DD2 is about to go to college and parents are looking to lower EFC for her. Parents hold ownership of 529 plans for both DD1 and DD2, so the amount parents hold for DD1 in her 529 adversely affects the EFC for DD2.
It seems to me that parents could transfer ownership of DD1’s 529 to her, since she won’t be getting any financial aid and the increase to 20% that she’d be expected to pay from her 529 is meaningless for her.
But moving DD1’s 529 to her ownership would lower the EFC that would be calculated for DD2. It would be lowered by the 5.6% of the amount in DD1’s 529 that the parents just transferred to be owned by DD1.
Am I missing something here, or does this make sense?
Oh, and not worried about giving ownership to DD1 of the 529.
State allows a transfer of ownership. I trust DD1 if it were transferred, she would consult on how to move it.
From my reading of info on 529’s, this seems like it works for the particular situation I described. It is not a parental asset if a child owns the 529 after ownership transfer.
The balance of a student-owned 529 is assessed for FAFSA purposes at the parent’s asset level of 5.6%, assuming the student is considered a dependent when calculating FA.
You can do it if, as Madison85 points out, the plan allows an ownership transfer. Some plans do and some plans don’t. A 529 account owned by a student’s sibling is not reported on the student’s FA forms, because it’s not available for the student’s use.
I’m not sure what, if any, gift tax implications there are in a 529 ownership transfer.
What happens if the first D loses the scholarship- grades below the bar, needs an extra year to graduate not covered by the scholarship, and “her” money is tied up or spent by D 2?
The way I read it, OP is asking about transferring ownership of D1’s 529 to D1, not to D2, so the money would not be “tied up or spent by D2.” OP, please correct me if I am misunderstanding.
Hypothetical is transfer the 529 that I own for D1 to D1’s ownership.
Not worried about D1 losing scholarship.
This question comes up because of the way FAFSA and CSS treat any 529 that a parent owns as 100% available for the student in college, ignoring the fact that parents have to set up a specific beneficiary under a state’s 529 plan. I guess the logic is that a parent can always switch beneficiaries, something I legally can’t do if I transfer ownership to D1.