<p>My oldest son is a senior. When he was a baby, my parents sold their company and put stock into his name, which we also contributed to over the years. It is now worth quite a bit (was way more of course a year ago, but we all know how that went). Anyway, I now find out putting it in a child's name is the worst thing to do. I'm thankful he has the money, but we have a small business that doesn't have alot of income. Anyway, my question is, is there anything we can do now to help get financial aid? Specifically, can we move the money into a different account (529 or ?). Also, can he purchase a house? Wouldn't that then not count as assets for him as houses don't count? Any help would be appreciated.</p>
<p>you could sell the stock, (and pay taxes on it) however this would still show as income for 2008 for your son. In planning for next year, you could then invest in a 529 plan, with yourself as owner. This would be calculated at the 5.6% rate as a parental investment not at the child's rate.</p>
<p>You might find something helpful here--</p>
<p>You can move the money to a student-owned 529 (most 529s are parent-owned, but a student can own one as well). You can't move the money to a parent-owned 529 because the funds must be titled the same as the original account (ie, in the student's name).
However, 529s will only accept cash, not company stock, so the stock would need to be liquidated first. </p>
<p>If you have a large capital gain, then this will show up as income on the student's taxes for 2008 and will need to be declared as such on FAFSA. The advantage of having the money in a 529 is that it won't be assessed at the student's 20% rate for FAFSA, but rather the parent rate of 5.6%. So you avoid the double assessment (income and asset).</p>
<p>This is the kind of thing that should be done the student's junior year (I know you realize this, but in case other parents are reading in the same situation).</p>
<p>If he's under 18, he probably can't purchase a house on his own.</p>
<p>Is there a limit to how much can be moved to a 529 in a year?</p>
<p>There is no limit to how much can be moved to a 529 in one year.</p>
<p>There are limits having to do with parent gifts which I'm quoting below for completeness, but these limits aren't applicable in the original poster's question since the 529 account would be self-funded by the student, not funded via a parent gift.</p>
<p>
[quote]
The rules for 529 plans allow you to transfer up to five times the annual gift tax exclusion amount to an account for one individual, and treat this transfer as a gift that occurs over a five-year period. The current annual gift tax exclusion is $12,000, so you can put $60,000 in a 529 account for one child, all at once, without using any of your lifetime gift tax exemption.
[/quote]
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<p>This is a problem only if your son declares that he wants to something less worthwhile with the assets. </p>
<p>We purposely used DS name for his assets. College comes along, but the funds are way down (911) like now. What to do? We borrowed money using DS assets to continually pay the accruing interest and careful to keep the borrowed money in balance with the assets. So if we wanted to eliminate the college debt, DS could sell the assets and pay off the loan. </p>
<p>We were not concerned in scholarships because we and DS had too much assets to qualify. He did get merit aid based on is achievements.</p>