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Based on the research I have done since this was suggested in this forum, no, the 529 is not owned by the trust. In fact, the trust must be liquidated, as the 529 plans only take cash. The 529 is “owned” by the parent (and treated as such when applying for FA), but it can only be used for the educational benefit of the child.</p>
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<p>Scott…almost EVERY college meets the needs of SOME students who are needy. That is a reality. BUT there are not MANY colleges at all that meet the need of EVERY student who applies.</p>
<p>You are talking apples and oranges…and I think you are trying to make folks believe that having full need met is much more prevalent at many more schools than it really is. That is my opinion…</p>
<p>hmom-</p>
<p>The bottom line is the bottom line. How much $ will the student get. I have seen it over and over again. </p>
<p>Stop looking for a promise, and start working on the process.</p>
<p>thumper-</p>
<p>Let me make it very clear… having full need met is far more prevalent than you think it is.</p>
<p>Scottaa, you make it sound really simple. And I suppose it’s at least somewhat simple if the kid has a 4.0/2200 and wants to go to a third tier school. Or if their in state school meets need for everyone below the poverty level which is still the minority of state schools. </p>
<p>But let’s talk about most kids on CC who are asking questions involving aid at colleges that are matches and reaches for them.</p>
<p>Simple, no. Counter-intuitive, probably. Throws itself in the face of the common knowledge, absolutely as evidenced by the reaction of many on this board.</p>
<p>And your 3rd tier comparison is hardly accurate.</p>
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It’s not prevalent enough to justify anyone being idiotic enough to “spend down” the trust which is what was proposed in the opening post, and which you seem to endorse in post #2. That’s more than enough money to pay for a year at a public university – and, combined with loans and the student’s own earning capacity, its probably good for 2 years.</p>
<p>And you don’t seem to have even acknowledged the point I raised in my post #7 about the ex-husband’s role in all of this. If the guy digs in his heels & refuses to fill out forms, or if he has money he is unwilling to contribute, the kid will find himself shut out of the financial aid system at most private colleges, and at many publics. </p>
<p>I don’t know what your “experience” really is: but I have a legal education. And it would very clearly be a violation of the parent’s fiduciary duty as a trustee for her son if she were to do anything other than do her best to conserve those assets for college, which is what the trust was created for. Moving it to a 529 account, if possible, might be an excellent idea. Spending it down… really, really stupid. Anyone who advises otherwise simply is dead wrong.</p>
<p>Calmom-</p>
<p>What’s your point about the non-custodial parent? Yes, if the student applies to one of the few schools that require non-custodial information (about 10%), he could have a problem. All the more reason to have other options.</p>
<p>But spending down custodial assets is hardly idiotic. How in the world can you call it idiotic to spend down assets that are being penalized at a rate of 20% as opposed to the alternative of using parental assets (which in this case appear to be non-existent) being assessed at 5.6%. I don’t know about you, but simple math tells me one course of action is better than the other.</p>
<p>And don’t get petty about experience.</p>
<p>Let me try to explain this in simple terms.</p>
<p>Right now, the kid has a fund of $35K to use to go to college. That fund is not enough to disqualify him from receiving financial aid. The worst case scenario is that it boosts his EFC by $7000. If he does get into a college that meets full need – and which doesn’t expect any information or contribution from his custodial father, then the balance will be met in grants & loans. He might have to take $7K of that trust fund toward the first year of college, leaving $28K in trust for the remaining 3 years. </p>
<p>If his mom decides to spend all that money so it won’t be counted on a FAFSA… he might get lucky and find some college that will meet 100% of his need and does not ask for any information or contribution from the noncustodial parent. (Good luck with that, though – I never found any college like that). </p>
<p>But it is more likely that he will face a gap – perhaps a very large gap – and when he goes to his mom wondering about his trust account, he will be confronted with the news that the money is gone. So then he is going to have -0- money for college – and no way to fill the gap. (At least with the $35K in funds, if he faced a significant gap, he’d have cash on hand to fill it for his first year.)</p>
<p>I’d note that in addition to the potential issues with the non-custodial parent, the OP said her sister had “erratic income as an artist.” That mean she probably has self-employment income, requiring her to file a schedule C & disqualifying her from the simplified needs test. Also, “erratic” could mean that she veers between good years and bad, if her work has the potential of drawing in occasional large lump sums – so you don’t even know what the parental income and assets are likely to be in the year the kid goes to college.</p>
<p>Reading between the lines in the opening post, I see a parent who is hard up for money looking for a good excuse to delve into a $35K trust fund for an improper purpose (“expenses related to son’s care” “he has to eat”). I say improper because legally the parent is responsible to provide for the basic needs of her minor son (food, clothing, etc) - raiding a trust account for that reason is definitely not appropriate … but I can see where a family that is hard up for funds could be lulled into thinking that was the way to go. </p>
<p>Again, the 529 account is a good idea. But the parent has a legal duty to preserve corpus.</p>
<p>OK, go a little easy on my sister - it was my idea to use the trust for present expenses (I was unaware that this is an improper use of the funds). So the 529 account sounds like the correct approach, especially since you are right that she might have a good year of income (although should that happen I would watch out for flying pigs).</p>
<p>Related to the latter point, if she does get a lump-sum payment for her work (could be as much as $12K), and she has flexibility with respect to when she can take it (i.e., she is not starving), is there a optimum time, with respect to FA planning?</p>
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<p>Calmom, just a slight correction on the simplified needs test for drb’s benefit (and other readers). Simplified needs has three different qualifiers and a common income requirement (income under $49,999). Filing a schedule C does not mean you can’t qualify, only that one of the other qualifiers must be used. For this year, the qualifiers are:</p>
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<p>Drb, if your nephew will be a sophomore this year(09/10), then the income/lump sum payments don’t matter. He graduates in 2012, so it’s her 2011 financial info that will be used for financial aid.</p>
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<p>Then your experience is fairly limited.</p>
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<p>And you’re not?!</p>
<p>I’m sorry, but the collective experience here is much, much greater than your own.</p>
<p>You may have gotten a student a exemption for the non-custodial form at a Profile school, but that does NOT mean this student will not have to file that form at that, or another, school.</p>
<p>You may have a student who had full-need met (without loans) at a school that doesn’t guarantee to meet full-need, but that does NOT mean this student will have his full need met at that, or another, school.</p>
<p>It’s far better to have $35K that can be assessed at 20% for college funding (which is the entire point of having the $35K in the first place – college funding!) than to have nothing. Having the money gives the kid options, options the kid will NOT have if the money is not there.</p>
<p>Spending it down for something other than college funding is stupid (in addition to it being a breach of trust).</p>
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<p>It’s not clear from drb’s description whether the trust limits the use of funds to educational expenses, her subsequent questions about spending down seems to imply that it does not. </p>
<p>I see this as a situation of low-income parents, unwilling or unable to generate sufficient income to pay living expenses or perhaps simply having a lifestyle above their means. Either way, that’s really what they need to address to decide whether consider spending this wonderful gift now to enrich the child’s life while he is still a child or to hold onto it for a future opportunity. I think I would be reluctant to spend it on day to day living expenses, such as food and clothing, unless the child is really lacking and there is truly no other way, short of putting it on the credit card, to provide for him. I would consider summer programs and other experiences that would enrich his life now, perhaps spending the earnings on the principal for these purposes.</p>
<p>It doesn’t have to be an “all or nothing” proposition, but can be a careful decision of what’s in her son’s best interest as opportunities arise.</p>
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<p>You may have a student who had full-need met (without loans) at a school that doesn’t guarantee to meet full-need, but that does NOT mean this student will have his full need met at that, or another, school.<<</p>
<p>Has anyone been listening here? Evidently not. </p>
<p>This isn’t about single instances. Generalized success in college funding about strategic choices and selections. It is about spreading your opportunities among multiple applications thereby increasing your chances of higher awards.</p>
<p>The thing about college is that it is not something to be viewed in a vacuum outside of other things in life. This is not a question that can simply be answered here as a lot of information is needed.</p>
<p>The first question is whether the money can legally be used for purposes other than college education. I am assuming that it can, since this is what is being considered. </p>
<p>The other question that I think is very important, is how desperately the money is needed for the benefit of the child. Clearly if he is being hurt from lack of basic provisions, it would be foolish to hold that money for college. But the definitions of need and basic provisions can be quite diverse. I think a big fear is that your sister takes the money to pay off her debts, for example and leaves her son with a big fat zero for college.</p>
<p>We don’t know how dire your sister’s financial straits are and how it is affecting her son. That is something that is determined only by direct knowledge of the situation and even then is subject to opinion.</p>
<p>I can say that if the son may be eligible for financial aid, that 20% of it would be expected to be used each year for college if it is in his name vs if it is in his mother’s (about 5% for the parent). Whether that will matter in his case, is not determinable. If he wants to go to a school that uses PROFILE and wants the father’s financials, he may not be eligible for financial aid anyways. Also having the money in mom’s name may make it more accessible to creditors and other situations where the money can be taken.</p>
<p>DRB, I would strongly suggest the 529 move and NOT using the money to pay off of mom’s credit cards. Also, would like to point out, mom’s credit card debt can be forgiven in bankruptcy – if either child or mom has to take out student loans, those can not be. I would be very hesitant to in effect switch student loans for cc debt – especially for a family where mom appears teetering financially.</p>
<p>35K – or 8.75 per year (assuming kid graduates in 4 years) is barely enough to cover in-state tuition where I live. Even adding in Pell grants, and loans, this kid will not be living the life of Riley. </p>
<p>I agree with the group that says full ride not likely, except at ivy league or third tier schools. That being said, I am a beleiver that a motivated kid can get an education at 3rd tier school.</p>
<p>I am a single mother too. It is time for mom to realize that she may have to wait tables, etc. In the current economey, tough, but I am certain grandparents meant this money for college. Also, has mom checked with lawyer – is she in a state where dad can be ordered to contribute. In short, i think mom is taking easy way out. If you were a true friend – IMHO – unless she is mentally or physically challenged – you would tell her to wake up and smell the coffee and take care of her CC debt.</p>
<p>OK, I need to reiterate that using trust (which has no formal constraints) for immediate expenses was my thought, not Sis’, put forward naively, and thoroughly rejected as a bad idea by CC experts (which is why I posted here in the first place). So she will not do this, and will explore the 529 option instead. </p>
<p>Low-life ex has no job and is expected to contribute only $300/mo by court order.</p>
<p>Yes she should get a job. I really do not wish to defend her unwillingness to do this, but some of you may recognize that “practical” is to “artist” as “snowball” is to “hell”.</p>
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<p>The most important conversation she needs to have…first with HERSELF and then with her son…is how much she is willing to contribute to his college education. If she doesn’t have a job and doesn’t intend to get one…the reality is that her resources will be limited…and so will her son’s ability to pay for college (outside of what he fortunately has in that trust fund). This could very well have an impact on either which colleges he applies to…OR which college he ultimately will be able to attend.</p>
<p>Someone has to pay his college bills. There is no “college tuition/room/board fairy” out there. The family needs a plan.</p>
<p>NO…$8k a year will not pay for a residential four year college…but it WILL pay for a community college and this could very well pay for this youngster’s first two years of college with some reserve left to help him out his junior and senior years.</p>
<p>drb, mom should be checking into law in your state whether the child support will continue when kid is in college and/or whether that can be put into 529.</p>