Welcome to College Confidential!

The leading college-bound community on the web

Sign Up For Free

Join for FREE, and start talking with other members, weighing in on community polls, and more.

Also, by registering and logging in you'll see fewer ads and pesky welcome messages (like this one!)

As a CC member, you can:

FAFSA - two 529 accounts, 2 kids. Question abount parent's investments

fishnschoolfishnschool Posts: 72Registered User Junior Member
Our Situation:

Child A starts college in Fall 2009 ($40K in her 529 account)
Child B starts college in Fall 2011 ($25K in her 529 account)

When filling out the FAFSA application for child A, do I include $40K or $65K in the sum of the parents total investments?

Thanks.
Post edited by fishnschool on
«1

Replies to: FAFSA - two 529 accounts, 2 kids. Question abount parent's investments

  • tjdtjd Posts: 143Registered User Junior Member
    Just got done with this myself. I believe the right answer is that you, the parent, report the amount for the younger child only. Then, in the student section, the amount for the older child will get reported.
  • radannieradannie Posts: 602Registered User Member
    I believe you report the entire sum. That is what I did.
  • tjdtjd Posts: 143Registered User Junior Member
    Seems to me that you should either report as parental asset, or child, but not both. For the FAFSA it does ask to include the 529 on the parent, so it probably makes sense to do it there, and not on the child.
  • Lunar_eclipseLunar_eclipse Posts: 108Registered User Junior Member
    For parent-owned 529 plans (the standard set-up), all plans that the parent owns are reported as parent assets (so 40K+25K).

    For student-owned 529 plans (UTMA 529), if the student is considered dependent for financial aid, the value is reported as a parental asset. If the student is considered independent for financial aid, the value is reported as a student asset.


    FAFSA on the Web Table of Contents
    FAFSA on the Web Table of Contents
    Questions About Your Parents
    What is your parents' net worth of current investments?

    Investments also include qualified educational benefits or education savings ac****s such as Coverdell savings accounts, 529 college savings plans and the refund value of 529 prepaid tuition plans.

    Note: Students who must report parental information on this form should report all qualified educational benefits or education savings accounts owned by the parents and/or the dependent student as part of the parental assets in question 92.
  • vballmomvballmom Posts: 3,128Super Moderator Senior Member
    To put this slightly differently, for dependent students, all parent-owned and student-owned 529 accounts are defined as parent assets. By "student", I mean Child A in the OP's original question.

    What's not defined as a parent asset is a grandparent-owned 529 for the benefit of the student (if any), or a sibling-owned 529. If the parent owns a 529 for the benefit of a sibling (Child B), then it is included as a parent asset on the current student's FAFSA. The reason for this is that money in parent-owned 529s can be transferred from one student to another, so these funds are considered "available" to all children in a family. The only way that money would not be "available" would be if the sibling owned his/her own UGMA/529.
    Child A starts college in Fall 2009 ($40K in her 529 account)
    Child B starts college in Fall 2011 ($25K in her 529 account)

    When filling out the FAFSA application for child A, do I include $40K or $65K in the sum of the parents total investments?

    You include the 65K as a parent asset.
  • fishnschoolfishnschool Posts: 72Registered User Junior Member
    I'm glad I asked this question. I was mistakeningly going to only include the $40K 529 account balance for dependant child A for the total parent's investments figure on the 2009 FAFSA application.

    Thanks to all for the detailed replies!
  • carranocarrano Posts: 5Registered User New Member
    I guess I don't understand how you can count an asset for one child when it is only available to the other child. I called the FAFSA people today with the same question as posted by fishnschool. In my case the numbers aren't as big (9K and 6K since the bottom dropped out), but 15K as an asset will have a big impact on my children's financial aid. I don't make much money, but putting the total on the FAFSA may make a dramatic difference...
  • vballmomvballmom Posts: 3,128Super Moderator Senior Member
    how you can count an asset for one child when it is only available to the other child.

    Parent-owned 529 accounts are not restricted in that they can be used for any of the children in the family (and even for extended family members), regardless of who they are currently "for the benefit of". This is the most common way that 529 accounts are titled. These 529 accounts are not assets for only one child. That's why they are all reported as parent assets.

    Child-owned 529 accounts (UGMA/529s) are restricted and can only be used for the child who is named on the account. That's why UGMA/529 accounts owned by child #2 are not reported as parent assets when filing child #1's FAFSA. That's also why I've become a fan of them.

    $15,000 in assets will result in an increase of $819 in EFC if this additional savings is over the $50K parent asset protection limit.
  • carranocarrano Posts: 5Registered User New Member
    My children's accounts are owned by them. I have never been on them. They didn't get their 529s til after they were 18. The FAFSA people say I need to add them up. Can you please let me know the reference that says that they can be divided between child #1 and child #2? Thanks.
  • vballmomvballmom Posts: 3,128Super Moderator Senior Member
    I'm not sure I'm clear on why the FAFSA people would tell you that you add up the 2 student 529s - will the students both be in college at the same time? I'm also not sure what you mean by dividing up the 529s. If each child owns his/her own FAFSA, then the assets can't be moved from one account to another.

    Taking the scenario of 2 kids in college at the same time, you'd be filling out FAFSA twice, once for child #1 and once for child #2. On child #1's FAFSA, you report all of your assets plus the value of child #1's 529 in the "parent asset" column. You report any other savings of child #1 in the "student asset" column. You would not report child #2's 529 in the "parent asset".

    Here is the FAFSA instruction:
    the accounts are reported as parental investments in question 92, including all accounts owned by the student and all accounts owned by the parents for any member of the household.

    Child #2's 529 is not an account owned by the parent in the information you gave above.
  • sblake7sblake7 Posts: 1,691Registered User Senior Member
    carrano:

    My understanding is that if these are set up with you as owner, and each child as a beneficiary, that you'd report both as parental assets on FAFSA.

    But equally important-- and something that may put your mind at ease -- remember that parents get an asset protection allowance, typically around 45K (depends on size of family and age of older parent). Reportable assets (checking, savings, stocks, bonds, 529's, etc but NOT retirement savings or most real property) below that don't get assessed at all. And the remainder over the allowance get assessed at just under 6%.

    Students, on the other hand, have no asset allowance, and their assets get assessed at 20%.

    Many families don't have assets over the allowance. That may be your situation, in which case reporting all 15K as a parental asset is a good thing. And even if the 15K is over the allowance, it will increase the EFC by less than $900.

    Parental income is the primary driver of FAFSA EFC for most families.
  • carranocarrano Posts: 5Registered User New Member
    Thanks for all your help. As I understand it, if a child has to report their parental assets then the 529s (doesn't matter who owns them - child or parent) go under the parents assets. That is why I'm confused, and I don't want to be accused of some kind of financial aid fraud by not divulging correctly. It totally makes sense to put the correct child's asset on their own FAFSA under my asset.

    Another thing to make it just a little more stressful, is both my children go to the same private university. I'm afraid they'll question why my assets are different for both, as there is no place to specify what I'm doing as far as separating the accounts.

    BTW, I was very clear with the rep at FAFSA. However, she did admit she had to reference a book and as someone else for advice...
  • sblake7sblake7 Posts: 1,691Registered User Senior Member
    Your (parental) assets and income should be the same for both FAFSA applications. The student assets and income will likely be different.

    529 college savings accounts are now all treated as parental assets. If you're still confused, read this updated article from SavingForCollege.com on 529's and their impact on financial aid:

    Does a 529 plan affect Financial Aid?

    This has the most current info for the 09/10 year (this stuff has changed a lot in the last couple years). It's a tad confusing.
  • vballmomvballmom Posts: 3,128Super Moderator Senior Member
    carrano - maybe try calling FAFSA again? How 529s are treated changed from last year; perhaps that's the source of some confusion? The link that sblake gave is quite clear on student-owned 529s, but it doesn't address sibling-owned 529s. I wasn't able to find anything that addressed both sibling-owned 529s and the new 2009 rules, but this is from an older website:
    The assets of other children are not considered by the need analysis formula. So putting parent assets in the name of a younger (or older) sibling can help shelter them from the need analysis. On the other hand, when that child enrolls in college, his or her assets will be assessed at the usual rate for students.

    FinAid | Financial Aid Applications | Maximizing Your Aid Eligibility
  • vballmomvballmom Posts: 3,128Super Moderator Senior Member
    3togo there might be some confusion between UGMAs and UGMA/529s here, but in general you're correct that when a child turns 18 (or 21, depending on the state), a UGMA reverts to a non-custodial account and is completely controlled by the child.

    For a UGMA, that means that the child can spend the money on whatever he/she wants.

    For a UGMA/529, the account remains a 529 and is thus restricted for use on qualified education expenses. Of course, any 529 can be liquidated and the funds withdrawn if the owner is willing to pay penalties and taxes on any gains in the account.

    My sons have both UGMAs and UGMA/529s, and I've made it clear to them from the time they could count that these funds are for college; in the unlikely event anything is left over after they graduate, the money is theirs to do as they please.
«1
Sign In or Register to comment.