<p>I read that money in the student's account gets counted extra towards determining EFC. Unfortunately, I didn't know this when I submitted my FAFSA. Could I transfer my money to my parents' account (temporarily), re-submit FAFSA, and hopefully get a lower EFC?</p>
<p>Do not do that!!! The FAFSA asks for the assets on the day you filed. If you change it now, you will raise huge financial aid red flags. You may very well be asked for documentation from the bank of your account on the day you filed the FAFSA. Don’t make the mistake of changing it now.</p>
<p>No. You are supposed to report assets as they are on the day you submit FAFSA. You cannot make changes except for where there were errors such as income being incorrectly reported.</p>
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<p>Alright, what about when I submit FAFSA next year? Can I transfer the money before I file FAFSA, file FAFSA, and then bring the money back?</p>
<p>The form is a legal document and you are expected to be truthful. I assume you are talking about a rather large amount of money, so you will have interest income listed on your tax return. The school will see this and wonder where the money is that earned that interest. If you are at a Profile school, especially one that is pretty generous with grant money, the financial aid officers will be attuned to the tricks of hiding money. Some may go so far as to ask you to provide documentation of your expense, if you tell them you spent the money that generated the interest income. </p>
<p>Bottom line is, you need to read the instructions on the financial aid forms and answer everything truthfully. If you want to know how to optimize your finances in the future for aid, read “How to Pay for College Without Going Broke.”</p>
<p>Rather than transferring money from your account (is it a custodial account? a UGMA?) to your parents’ account, which is legally dubious, why not just spend down the money on your college expenses this year, so that there is less in the account when you file FAFSA next year?</p>
<p>One person can only transfer or “gift” maximum $11,000 to another person tax free. If you gift more than that the recipient has to declare the income and pay taxes. This is probably not something you and your parents want to do each year. I do not know the specifics of gifts to parents or children, but I agree with the others that you should not do anything that raises red flags with the financial aid office or IRS. If you have the money, then it is there to be used for your schooling, no?</p>
<p>Yeah, but I do want to save some for my upperclassman years. And I’d like to save it in the way that penalizes me the least when it comes to financial aid.</p>
<p>Boston2008: That’s not true. You can give someone up to $12,000 a year without reporting it. The gift is always tax free to the recipient. If the gift exceeds the yearly max, you must file a gift tax return at which time the gift may, or may not, become taxable to the giver.</p>
<p>For FAFSA 20% of money in the students name goes to the EFC compared to @ 5.6% of money in the parents name (unless you qualify for the simplified needs test when assets are not considered at all) Are you talking about sums large enough to worry about the 15% difference?</p>
<p>lgeller…there is nothing you can do for the upcoming year regarding the transfer of assets. You have already filed your financial aid forms and the asset information is as of the date of your initial filing for the year. The only time you can change assets is if you made a mistake (e.g. reported the wrong amount, or reported something incorrectly). Otherwise, you leave the asset information alone regardless of what other changes you make on your FAFSA.</p>
<p>Now…regarding “having money for upperclass years”. It is now 2008. You can spend down some of the money you have instead of using other money. If you transfer it, it could raise a “red flag” as to why. Are you talking a large sum of money here or a smaller amount? The reality is that the money you use is still going for your college education (instead of coming out of the parent account). </p>
<p>I guess I’m confused. Are you trying to figure out a way so that your personal assets won’t be seen or used for the college expenses or financial aid calculations? If that is what the money has been saved for, I would vote for using it for that purpose…and consider yourself lucky that you have those resources.</p>
<p>I agree with everyone above that for this year there’s nothing you can do. </p>
<p>However, you can take some or all of the money and put it into a 529 plan. The income will be tax free, not count for your EFC and the assets will be assessed at your parent’s rate, not your rate, for next year. That way you can use it for college related expenses whenever you want.</p>
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<p>In that case, open a 529 in your name, liquidate all of the funds in your account (I’m assuming a brokerage account, but it’s not entirely clear) and transfer them all to the 529. Be sure the 529 isn’t over-funded; that is, it should only have enough money to pay for your college expenses. Calculate any realized capital gains on your brokerage account, if any, to make sure that the capital gains taxes you pay will not exceed the benefit you get in moving the funds.</p>
<p>All 529 accounts, even those that are student-owned, are assessed at the parent rate rather than the 20% student rate for FAFSA.</p>
<p>As previously mentioned, there is nothing you can do for this year. However, if you are employed, you can open a Roth IRA or a minor Roth IRA and put away a maximum of $5000 towards retirement for 2008 (or the amount of your earned income for this year whichever is lower)</p>
<p>Other CCers correct me if I am wrong, but I see no questions on the FASFA that asks about retirement accounts even for the student ( I think the profile does) </p>
<p>Anyway, on of the great things about the Roth is that you can take withdrawals without penalties for the purchase of your first home or for tuition. If you don’t need the money for those reasons later on, you will have started your retirement account early.</p>
<p>FAFSA doesn’t ask about the value of IRA accounts. So it doesn’t count the value of the IRA account as an asset.</p>
<p>It does ask for the amount contributed to a tax-deferred IRA in the current tax year, and than adds that amount back into total income available for assessment.</p>
<p>That’s right, but I’m talking about a Roth which is paid after taxes. I’m not looking at him reducing his income, but eliminating some of his assetts albeit with earned income.</p>
<p>I thought I read that you cannot contribute to a 529 for anyone over 18. Is this correct? If so, it may be too late to open a 529, depending on the OP’s age. Or maybe that was for Coverdell education savings.</p>
<p>Definitely can’t contribute to a Coverdell after 18, but not sure about 529. I couldn’t find any limit on age for contributions, but that doesn’t mean there aren’t any (although I am usually pretty good at finding it if it’s there).</p>
<p>There are no income limitations or age restrictions on 529 plans. You can even set one up for yourself if you’re considering going back to college.</p>