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FAFSA-parent or student assets?

22wins22wins Posts: 49Registered User Junior Member
Perhaps someone can answer this question about assets for me. I have twins headed for State Universities in the Fall. I have custodial UGMA CD accounts for each of them, same dollar amounts. In 2010 my husband was unemployed for 7 months. In 2009 he had taken a $20,000 salary cut. Needless to say, things have been financially challenging. So...do I total the two account amounts and note in parent assets? If I do that it appears that we have cash on hand, which we don't. OR...do I note the amount of each child's account under student assets? I think that's the better choice because the FAFSA will reflect only what each twin possesses, not double the amount as it would appear if indicated under parent assets. I'm hesitant because at a college fair a FAFSA person said I should list the amounts under parent assets. What do you all think? PLEASE ADVISE.
Post edited by 22wins on

Replies to: FAFSA-parent or student assets?

  • swimcatsmomswimcatsmom Posts: 14,948Registered User Senior Member
    UTMAs have to got in the name of the student except for 529 accounts. But 20% of student assets go to the EFC and students have no asset protection (parent assets have some protection and then only 5.6% goes to the EFc).

    If there is any way to convert the CDs to 529 accounts then they would be reported as parent assets, which would be much better for the EFC.
  • 22wins22wins Posts: 49Registered User Junior Member
    Thanks swimcatsmom. I did not realize the broad percentile difference as it is applied to student and parent assets. I don't file separate income tax for my twins. Their dividends are reported on our income tax. Maybe that is why the FAFSA person said to indicate the amounts under parent assets. With that great percentile difference, I now understand why, in which case wouldn't it be better then to report under parent asset with the 5.6% calculation applied? From what I have read, with two children in college simultaneously, my EFC is split 1/2 and 1/2 on each child's FAFSA.
  • swimcatsmomswimcatsmom Posts: 14,948Registered User Senior Member
    Yes, the part of the EFC generated by parent information is split between the number in college. Any part generated by the student's own income and assets stays with that student.

    I am surprised the FAFSA person would tell you to report is as a parent asset if it is a UTMA. Your husband is the custodian for the UTMA account, not the owner. UTMAs are supposed to be reported as student assets, unless they are 529 accounts.
    41. Student Net worth of investments. Net worth means current value minus current debt. Investments include real estate such as rental property, land and second or summer homes. Do not include your primary place of residence (that is, your home). Include the
    value of any multifamily dwellings that you own, except that you must exclude the portion of the value of a dwelling that is your principal residence. Investments also include trust funds, Uniform Transfers to Minors Act (UTMA)/Uniform Gifts to Minors Act (UGMA) Custodial Accounts, money market funds, mutual funds, certificates of
    deposit, stocks, stock options, bonds, other securities, Coverdell savings accounts, 529 college savings plans, the refund value of 529 prepaid tuition plans, installment and land sale contracts (including mortgages held), commodities, etc. Do not include the value of life insurance and retirement plans (401[k] plans, pension funds, annuities, nonEducation IRAs, Keogh plans, etc.). Do not include UTMA or UGMA accounts for which you are the custodian but not the owner.

    You should report the value of all qualified educational benefits or education savings accounts, such as Coverdell savings account, 529 college savings plan or the refund value of a 529 prepaid tuition plan in Question 41 if you or your spouse own the account and you are not reporting parental information on this application.

    If you are a dependent student who owns qualified educational benefits or education savings accounts, such as Coverdell Savings Accounts, 529 College Savings Plans, or the refund value of 529 prepaid tuition plans, you must report the values in Question 89,
    along with your parents‘ asset information.
    89. Parent Net worth of investments. Net worth means current value minus debt. Investments include real estate such as rental property, land and second or summer homes. Do not include your parents‘ primary home. Include the value of portions of multifamily
    dwellings that you own, except that you must exclude the portion of the value of a dwelling that is your parents‘ principal residence. Investments also include trust funds, Uniform Transfers to Minors Act (UTMA)/Uniform Gifts to Minors Act (UGMA) Custodial Accounts, money market funds, mutual funds, certificates of deposit, stocks,
    stock options, bonds, other securities, Coverdell savings accounts owned by your parents, 529 college savings plans, the refund value of 529 prepaid tuition plans, installment and land sale contracts (including mortgages held), commodities, etc. Do not include the
    value of life insurance and retirement plans (401[k] plans, pension funds, annuities, nonEducation IRAs, Keogh plans, etc.). Do not include UTMA or UGMA accounts for which your parents are the custodians but not the owners.

    Your parents must report in Question 89 all qualified educational benefits or education savings accounts, including Coverdell savings accounts, 529 college savings plans, and the refund value of 529 prepaid tuition plans that they own for any member of the household. This includes accounts owned by the dependent student.
  • 22wins22wins Posts: 49Registered User Junior Member
    Yes, I understand that now. I had never heard of a 529 or Coverdell until about a year ago. I guess I'm old-fashioned. I put the money in the bank. I will see about transferring to a CD, but my guess is there would be a penalty. The thing is, both my kids actually have more than my husband and I. We really have no assets. Our home is worth less than our mortgage and our IRAs total way less than $100k. And we are in our late 50s. We don't live big, very modestly in fact. No vacations, new cars, manicures. We are pay-check-to-paycheck. I'm pretty sure we fall into the need-based category based on the 4caster. I just want my kids to get the most need out there. Let me ask this, based on your post, how does the FAFSA know if you are reporting your assets accurately? By that I mean, we file income taxes, we have nothing to hide, and the dividends from those CD UTMAs are reported on our income tax, with the twins as dependents. It's money I saved. It's my money. My kids never had a job.
  • vballmomvballmom Posts: 3,132Super Moderator Senior Member
    Does your income tax include "Parent's Election To Report Child's Interest and Dividends"? That's how you'd show that this dividend income was your children's, not yours. From the IRS website:
    How to make the election. Make the election by attaching Form 8814 to your Form 1040. (If you make this election, you cannot file Form 1040A or Form 1040EZ.) Attach a separate Form 8814 for each child for whom you make the election. You can make the election for one or more children and not for others.

    I agree with swimcatsmom - look into moving these funds out of CDs and into 529 accounts. If the penalty is too severe to make the move right now, find out when you can cash in the CD with no penalty and make plans to do so then. Either that or calculate the cost/benefit of taking the penalty anyway.
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