<p>We have boys class of 2014 and 2016 and we just learned the differences in 529 accounts. This was set up a long time ago and we have one account for each.</p>
<p>We thought that we were saving for college but if they didn't need the funds, we would use it for retirement or use it for the other child. Surprise...finding out now what we have is different. </p>
<p>SHould we be concerned about the UTMA? It is a "21 age" for ownership.</p>
<p>Good question! You may want to ask it in the Financial Aid Forum as well.</p>
<p>I do not believe you can “repurpose” the UTMA funds – and at 21 (if that is the age of majority in your state) the child gains full control of the account, and could choose to do anything with the money.</p>
<p>You should be able to withdraw principal from the 529 plan without too much problem, if that is what you want to do. (I’m a little unclear on what you want to do.) There are penalties for withdrawing earnings unless they’re used for legitimate higher ed expense, but even there, if the accounts have suffered losses due to market conditions you might not be talking about much.</p>
<p>I am certainly sympathetic on confusion over the UTMA. I think banks do a terrible job of explaining the UTMA (I thought D1 and I were opening a joint savings account when she was small and we went to the bank, but it was an UTMA… ultimately no harm from it, but the bank certainly did not explain the consequences).</p>
<p>I am a bit confused by your post, however.</p>
<ul>
<li>Do you have one of each account for each child? A 529 and an UTMA for each?</li>
<li>What kind of money are we talking about? College for 2 is hugely expensive (minumum total of about $200,000, at least at our state schools, and more like $400,000 for full price privates or Ivies – can be dented with merit aid, but still a lot). So before you assume you saved too much/can’t use for retirement, consider whether there would even be any leftovers.</li>
<li>Do you expect your kids to go to college? If not, you could have a challenge with this.</li>
<li>Are you aware that the UTMA counts as an asset of your child for financial aid purposes, while the 529 is a parental asset (assumes less of a parental asset is available for tuition purposes)? This is a factor if you are planning to apply for need-based aid</li>
</ul>
<p>Generally - the UTMA money WILL be theirs at age 21, but can be spent for their benefit before then. So I guess if you really have too much money, you might want to spend down the UTMAs first so the kids don’t just walk away with your savings. </p>
<p>My understanding of the 529 is that there is a penalty (federal is 10% now, and there may also be a penalty at the state level) and income tax due on the investment earnings of the account, but not on the principal you invested. So you can probably get your principal investment back, but you will take a hit on the earnings (tax free & penalty free if you use it for education, not if you just take it out).</p>
<p>Finally, 529 money can be used for graduate school. So if you are inclined to help your kids out there, the money can be used for that.</p>
<p>We were told that you can spend down the UTMA, with items that benefit the child, while the child is under age.</p>
<p>We considered doing that while simultaneously spending money from our current income for a 529. </p>
<p>It all seemed cumbersome and we weren’t likely to qualify for financial aid in any way. So we left the UTMA without making a change to a 529.</p>
<p>We cashed out some from the UTMA in July before freshman year of college, and more recently for junior year.</p>
<p>As long as you spend the UTMA before the kid is 21… once they are 21, it is their money, and it does not have to be spent on college.</p>
<p>Your post is confusing to me. What are the accounts? We had a UGTM account for our only child. After my husband transferred stock to S he realized that S would have control of the money at age 21. As custodian of the account, I transferred a portion to a 529 that gave prepaid tuition credit so he would at least use part of the money for education. Unfortunately, he chose a non-member school. This summer both accounts will be under his control. A 529 bought with UGTA or UTMA is different from a 529 bought with other funds; it cannot be transferred to another.</p>
<p>I am sorry that I didn’t provide more information. It seems so private but I certainly can’t talk to people that I know in real life. </p>
<p>Husband was unhappy with investments especially the 529’s so he changed the fund. The financial advisor can’t explain why we have two accounts for each. He was complaining in detail to me and mentioned UTMA. I had heard the term here- googled it and found out that it is different than what we thought we had. A custodial account that the child will take over when he turns 21. </p>
<p>Our goal was to have enough for state school for each kid- we are on track to have 80,000 for each kid by high school grad. We always thought it would be available to us if it wasn’t needed by kid. Truly, 15 years ago, we still thought athletic scholies were in the future because Grandpa was retired NFL and 3 close family members were all full ride athletes. Silly, right? 16 year old is 3rd in his class with a great work ethic and interested in STEM so there may be merit money. </p>
<p>My 16 year old is so far interested in Pitt, Iowa and U. of Cincinnati. He could stretch higher depending on ACT/SAT. We could cover the state schools with these accounts. If we owe more, yearly bonuses could take care of it. The household income is high. usually over 250,000 depending on bonuses. My husband is very frugal and we won’t even let the boys look at a school that costs 60,000 that doesn’t give merit. </p>
<p>One concern is that if the oldest doesn’t use all of his, it can’t be used by the youngest.
We always felt like this money was “ours” not theirs and if there was any left, it would be our reward for raising great kids. Haha.</p>
<p>ARABRAB said we “can’t repurpose the funds” That is one of the biggest concerns. You can’t liquidate the account and invest in something else. </p>
<p>INTPARENT said " it is considered Student money instead of Parent money"- won’t make a difference for FAFSA because of high income household. </p>
<p>Idea for the Future- We have decided to stop adding to the accounts. We are jump-starting a new joint savings plan with 30,000 from some inheritance. We will continue to add the same amount each month but keep it flexible. </p>
<p>So is 80,000 too much? My husband said whatever is remaining will go to the child, help with a down-payment, graduate school, etc.</p>
<p>Not clear on whether the money is in a 529 account or a UTMA. For a 529, the money can be used for either child (regardless of who is named). It can also be used for grandchildren in the future. You can also withdraw the money and pay a penalty.</p>
<p>You can also change the beneficiary to use a 529 for educational expenses for any family member, including yourself. Probably not if the 529 was funded from an UMTA, though. As others have said, an UMTA/UGTMA account legally becomes the property of the child when they reach the age of majority, which is typically either 18 or 21 years old. They then can use the money for anything they want.</p>
<p>The child can gift the amount from UTMA back to you when he/she turns 18/21. I know not all kids are the same but I don’t think my child would have problem doing that after I paid upward of $100k for his/her education. Although I am probably inclined to split the money if we are fortunate enough to have some money left over from college education fund.</p>
<p>If you feel you have too much, there are ways to draw down funds -</p>
<p>Like some previous posters have mentioned, money in the custodial accounts can be spent for the benefit of the child. My D has used some of hers for travel and sports camps. This is not 529 money, just other custodial savings. </p>
<p>If the child has money in a 529 and gets merit scholarships, he can withdraw 529 money equal to the amount of the scholarship penalty-free (tax must be paid on the earnings however).</p>
<ol>
<li>Find out exactly how much is in each 539 plan and in each UMTA account.</li>
<li>Consider spending down the UMTA accounts on expenses for the kids (application fees, test fees, camp expenses,…)<br></li>
<li>Pay the first year of college expenses from UMTA accounts for each child.</li>
<li>If there’s money left in the oldest child’s 529 after college expenses are handled, change the beneficiary to be the younger child. </li>
<li>Consider not using other parental assets until the UMTA and 529 plans are exhausted.</li>
</ol>
<p>Thanks for all the help. I have tried researching the answers but it looks like the laws have changed a couple times so things aren’t clear.</p>
<p>For those people suggesting paying anything possible to spend down accounts…does that include high school expenses like AP fees?</p>
<p>If you have 2 UTMA accounts, you can spend the money on your two sons’ expenses now and the funds aren’t limited to higher education expenses. Anything from cars to computers to AP tests to college applications are legitimate expenses, as long as the expense is for the benefit of the child. You can also use the money for college. The boys will take control of the accounts when they reach the age of majority in your state (21). They can gift the money back once they are no longer minors, subject to Federal gift tax rules.</p>
<p>If you have 2 parent-owned 529 accounts for the benefit of each son, the funds must be spent on qualified higher education expenses; they can be withdrawn for other expenses subject to a penalty and taxes on the gains (if any). You can transfer money from one son’s account to the other’s with no penalty.</p>
<p>If you have 2 child-owned 529 accounts, also known as UTMA-529s, then the same rules as the 529s above apply, with the exception that the funds cannot be transferred from one account to the other. These accounts become the property of the child at age of majority.</p>
<p>To answer your original question regarding how much to set aside, the more the better 
However you do need to be careful not to over-fund 529s due to the penalties and taxes on the gains.</p>
<p>This is an old thread, but I had a quick question. If I overfunded a 529 for D1 and she took out modest student loans, would I be able to repay the college loan w the 529 funds or be forced to transfer the funds (Schwab said that was an option) to D2’s 529 (senior in high school)?</p>
<p>Distributions from 529 funds have to be taken in the same tax year as the expenses were incurred. If the loan is taken out in January, used for expenses and you pay it off in December of the same year with a distribution you could do that, but that’s probably not what you had in mind. It wouldn’t necessarily be the full loan amount, only the part you can attribute to qualified education expenses via a bill or some other doc. Also, you can’t use 529 funds tax free if the same expenses are used to claim an education credit. If there is excess you can take the funds out and pay tax on the earnings plus a penalty or transfer to another sibling.</p>
<p>IRS Pub 970 tells all about it in Chapter 8:</p>
<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>