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Should I transfer my youngest's 529 accounts to older siblings?

fifthstudentfifthstudent 2 replies2 postsRegistered User New Member
I have triplets going into their sophomore year of college and a child still in HS, going into her junior year. Wondering if I should transfer my younger child's 529 money into her siblings accounts and use the money to pay for their college to make out better when I fill out the FAFSA for her. Even with 3 in college we were not able to get financial aid from their colleges, though our EFC was below the total cost. Hoping that the 4th will make out better as - at least for the first year - we will have 4 in college together.
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Replies to: Should I transfer my youngest's 529 accounts to older siblings?

  • thumper1thumper1 73755 replies3215 postsRegistered User Senior Member
    You sound like you are counting on your youngest getting accepted to a college that meets full need for all. Your financial gymnastics might not net a dime of additional need based aid if the college doesn’t guarantee to meet full need for all.

    And then you also will have used up all of your 529 money on your triplets...leaving nothing for the younger sibling.
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  • twoinanddonetwoinanddone 22422 replies14 postsRegistered User Senior Member
    If you didn't qualify for FA with 3 in college, you either have a very high income or the 529 plan for #4 is HUGE. Yes, the 529 plan (if it is in your name with child is the beneficiary) is included in with the kids currently in college, but at your asset rate of 5.6%. I you have $100k in that 529 account, that would add $5600 to the parents' assets Would. lowering the EFC for each a few hundred dollars have made a difference in need based aid?

    When you have 4 in college it will not matter if that money is still in the 'family' 529 pot. If it is spent then yes, the overall family assets will have been spent down, but then what will you use to pay for the final child's college?
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  • SybyllaSybylla 3562 replies40 postsRegistered User Senior Member
    edited August 9
    I doubt that the 529 growth you might have enjoyed for 123 will continue for 4. I assume 123 are in lower cost schools, if you aren't getting ANY FA. The thing is, that really might not change for 4. Keep her money separate. Who knows what is on the global economic horizon.
    edited August 9
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  • fifthstudentfifthstudent 2 replies2 postsRegistered User New Member
    Our income is "high" by FAFSA standards, but we fall in that middle class bracket where we can't afford private school but our kids don't get enough aid to go there. So yes, the three are in lower cost state schools (though one very generous private school did offer my daughter a phenomenal aid package). My youngest is hoping to be able to be the one that can actually afford a school that she wants to go to. We have a deal with them where we pay $40K each and the rest is on them. That will be paid with a combination of 529 and loans, so it doesn't really matter to us or to her when we clean out the 529 accounts. I just wanted to make sure I am not missing something legally and make sure my thought process is not erroneous!
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  • thumper1thumper1 73755 replies3215 postsRegistered User Senior Member
    Well..if you liquidate that 529 on the triplets, you will be doing your whole $40,000 for the younger kid in loans. Do you really want to do that?
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  • SybyllaSybylla 3562 replies40 postsRegistered User Senior Member
    edited August 9
    40K a year? 40K each is barely room and board if it is over 4 yrs. Do 123 live at home? IMO, you really want to make sure it all looks fair. Make sure that lucky 4 who gets to go wherever she likes is budgeted for the whole 4 years. FA is usually assessed each year. Is it correct that you only have one year in the crossover where you might optimize FA? Then she will be full pay.
    edited August 9
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  • mommdcmommdc 11275 replies30 postsRegistered User Senior Member
    Let's say your EFC is $30,000 per triplet. So $90,000 total.
    For FAFSA if you have 4 in school at once the EFC will be $22,500 for each of the four. But you will still pay the same, unless the youngest gets need based aid.
    So if you pay $120,000 or $40,000 for each triplet, and let's say the youngest would pay $30,000 (not many schools meet need as defined by FAFSA EFC alone), then.in the fifth year you would pay $150,000. That is not less than $120,000.
    And if she goes to a meets need school, once she is the only one going to college, the EFC would sharply go up, and you.might be full pay for the remaining years.
    You could end up spending $160,000 each for the triplets and $200,000+ for the youngest.
    If you have the budget of $40,000 each per year then you might want to do that for all of the children.
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  • cptofthehousecptofthehouse 28768 replies56 postsRegistered User Senior Member
    You have to do the math, and then make some far reaching assumptions. The 529 is assessed at about 5.6%, so what difference do you think it will make on your youngest’s total EFC? Not to mention the fact that hardly any school guarantees to meet need based on EFC. You can have a zero EFC and the only thing guaranteed at that level is PELL AT ABOUT $6k and Direct Loan $5500 freshman year.

    You have somehow managed to get through the first year of the triplets’ first year of college. Your FAFSA EFC for all three of them is about the same as what it would be for one child in college. So if your financial situation is about the same, it’s not as though you are going be getting any more aid for the youngest, possibly eligible for less.

    The drawback in emptying the 529 for the triplets is it could leave you less able to pay for your youngest if the family financial situation changes for the worse. You won’t have that designated college fund to pay some of the cost.

    The drawback to leaving too much in the 529 is that your youngest might not need it and to access the funds, you could owe taxes on the amount.
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  • BelknapPointBelknapPoint 4375 replies16 postsRegistered User Senior Member
    The drawback to leaving too much in the 529 is that your youngest might not need it and to access the funds, you could owe taxes on the amount.

    Taxes would be owed on the earnings portion only, not the whole amount.
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  • cptofthehousecptofthehouse 28768 replies56 postsRegistered User Senior Member
    Some states require recapture if contributions are deducted from state taxes
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