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Grandparents informed us of UGMA 2 days after we finished CSS and a month after FAFSA

JulyAugust321JulyAugust321 12 replies1 threads New Member
My husband's parents have just informed us that they have a UGMA for our daughter in the amount of $2500. She turned 18 in August. They said they were planning on holding it for her until she turned 21.

We are not sure of the best way to go about handling this, but we want to make sure her applications are honest and on the up and up. We are super frustrated that we just found out about this account and we are not sure what to do about it. Daughter is in Africa on a study abroad, so that complicates things in terms of logistics.

She is on a gap year, currently applying to schools and receiving decisions. FAFSA was submitted a month ago and CSS profile just a few days ago. Then we learned about this UGMA.

Should we amend her financial aid forms? Withdraw the money and then count it as income for her following year fafsa? (Not sure if that is an option? )

She does not have 529s or Coverdell or savings of any kind, and until we learned about this account, I didn't know what a UGMA even was.

Suggestions for how to proceed? We are not ungrateful that someone saved for her, but we are frustrated that she had accounts none of us knew about until after her forms were submitted.

Help!
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Replies to: Grandparents informed us of UGMA 2 days after we finished CSS and a month after FAFSA

  • thumper1thumper1 76147 replies3359 threads Senior Member
    @BelknapPoint your thoughts?
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  • Groundwork2022Groundwork2022 2695 replies58 threads Senior Member
    What state do the grandparents live in? The UGMA account is an asset of the student at a certain age, and students' assets are assessed at 20%, so if you file an amended FAFSA, your aid would go down about $500 the first year, $400 the second year (assuming you took that $500 out for college expenses in Year 1), etc. etc. That's unfortunate, but generally do-able in the grand scheme of things.

    Ask the GPs to either hold off giving their grandchild any more money until at least spring of their sophomore year of college (they can self-bank it in the GPs' names until that time), OR to give the grandchild cash with the expectation he/she will spend it right away (or stick it in their sock drawer - not in a bank/investment account).
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  • JulyAugust321JulyAugust321 12 replies1 threads New Member
    Also, we asked yesterday if there were accounts under our 2 younger kids' names, and they refused to tell us. Today they informed us that they do have accounts, but they have far less in them (because the boys are younger.)

    So do we need to report the boys' UGMAs as well on either the FAFSA or CSS?
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  • JulyAugust321JulyAugust321 12 replies1 threads New Member
    They are in Oklahoma.
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  • BelknapPointBelknapPoint 4699 replies17 threads Senior Member
    My husband's parents have just informed us that they have a UGMA for our daughter in the amount of $2500. She turned 18 in August. They said they were planning on holding it for her until she turned 21.

    Have you confirmed that 21 is the age of majority concerning UGMA accounts in the state where the account at issue is held?

    Should we amend her financial aid forms? Withdraw the money and then count it as income for her following year fafsa? (Not sure if that is an option? )

    Until your daughter gains control of the UGMA account, anly the account custodian can make withdrawals. I'm not sure I would amend FAFSA and Profile, given that at the time those forms were completed you were using the best information you then had available to you. There was no intent to deceive.
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  • JulyAugust321JulyAugust321 12 replies1 threads New Member
    Account is held in Oklahoma. We live in Illinois. I am pretty sure 18 is the age of majority, but I need to double-check.

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  • BelknapPointBelknapPoint 4699 replies17 threads Senior Member
    The UGMA account is an asset of the student at a certain age...

    UGMA/UTMA accounts are a reportable asset of the student/account beneficiary as soon as the account comes into existence and is funded. (In OP's case, the account could not be properly reported because its existence was not known at the time FAFSA and Profile were completed.) The "certain age" (based on state law) is important in terms of when the account beneficiary can gain control of the funds; it has nothing to do with FAFSA and Profile reporting requirements.
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  • privatebankerprivatebanker 5793 replies84 threads Senior Member
    edited December 2019
    No on question two. It’s not the minors property until the age of majority. 18 or 21.

    I would let them know you just learned of this and it is to be used immediately for daughter to buy a computer or something. Then it’s really nothing. Also it’s not taxable income to her so nothing to report. Then see what they say.

    Just to be clear. She was entitled to this asset when you filled out the forms but you had no knowledge of this asset?

    Not sure what the letter of the law is but they will expect her to use this for school. Unless at this point after you let them know the details and perhaps it’s going to be used for x they will let it slide. If not then you’ll know what to you have to use it for.

    However. If the age of majority is 18 in your state. The grandparents cannot hold it until 21. That’s not how it works. After 18 the income from the interest or dividends need to be reported for income tax purposes for your daughter.

    If the age of attainment is 21. You don’t have to report it yet is my understanding. It’s in limbo with no beneficial interest, currently, unlike certain trusts that there is current beneficial interest although not theirs, in real terms, but still must be reported.for css purposes.
    edited December 2019
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  • BelknapPointBelknapPoint 4699 replies17 threads Senior Member
    Also, we asked yesterday if there were accounts under our 2 younger kids' names, and they refused to tell us. Today they informed us that they do have accounts, but they have far less in them (because the boys are younger.)

    So do we need to report the boys' UGMAs as well on either the FAFSA or CSS?

    The UGMA account balances for the younger kids should not be reported on your daughter's FAFSA and Profile; that money is not legally her asset. However, when the boys are filling out their own financial aid forms in the future, any money in a UGMA/UTMA account of which they are a beneficiary needs to be reported.
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  • JulyAugust321JulyAugust321 12 replies1 threads New Member
    Got it. So just to be clear, our options are:

    1. Amend Fafsa/CSS

    2. See if she can withdraw (might be difficult as she is in Africa through May) and buy a computer/educational items

    3. Do nothing.

    With #1, I assume she is not at risk of being dishonest with her forms, but our EFC ($31,000) will go up by $500. Will we be at risk for some sort of FAFSA auditing/additional verification proces?

    #2, no risk, but difficult logistically?

    #3 Risk is....unclear.
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  • BelknapPointBelknapPoint 4699 replies17 threads Senior Member
    It’s not the minors property until the age of majority. 18 or 21.

    I would let them know you just learned of this and it is to be used immediately for daughter to buy a computer or something. Then it’s really nothing. Also it’s not taxable income to her so nothing to report. Then see what they say.

    Just to be clear. She was entitled to this asset when you filled out the forms but you had no knowledge of this asset?

    Not sure what the letter of the law is but they will expect her to use this for school. Unless at this point after you let them know the details and perhaps it’s going to be used for x they will let it slide. If not then you’ll know what to you have to use it for.

    However. If the age of majority is 18 in your state. The grandparents cannot hold it until 21. That’s not how it works. After 18 the income from the interest or dividends need to be reported for income tax purposes for your daughter.

    If the age of attainment is 21. You don’t have to report it yet is my understanding. It’s in limbo with no beneficial interest, currently, unlike certain trusts that there is current beneficial interest although not theirs, in real terms, but still must be reported.for css purposes.

    This is just wrong in so many different ways. Assets held in a UGMA/UTMA account are the legal property of the minor beneficiary and should be reported on financial aid forms. Account earnings are taxable to the minor beneficiary, regardless of the beneficiary's age. The minor beneficiary typically will not be entitled to assume control of the account until the beneficiary attains the age of majority, as determined by the controlling state law where the funds are legally being held. There's a beneficial interest created as soon as the account is opened and funded.
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  • BelknapPointBelknapPoint 4699 replies17 threads Senior Member
    2. See if she can withdraw (might be difficult as she is in Africa through May) and buy a computer/educational items

    Please explain how your daughter might be able to withdraw funds from the account, even if she was in the U.S., when a grandparent acting as the account custodian has sole control of the account.
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  • JulyAugust321JulyAugust321 12 replies1 threads New Member
    She's 18. Wouldn't the account be hers now?
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  • JulyAugust321JulyAugust321 12 replies1 threads New Member
    As I said before, I am extremely unfamiliar with UGMAs and didn't know this existed until yesterday. My husband talked to his mother and she told him that she couldn't withdraw or transfer anything now that our daughter is 18.

    I honestly have zero idea what steps to take next. We haven't even told our daughter yet, but we will be talking to her tomorrow during a scheduled phone call.
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  • BelknapPointBelknapPoint 4699 replies17 threads Senior Member
    She's 18. Wouldn't the account be hers now?

    It depends of the UGMA/UTMA laws of the state where the account is held. Different states have different threshhold ages that determine when a UGMA/UTMA beneficiary gains control of the account.
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  • JulyAugust321JulyAugust321 12 replies1 threads New Member
    It's in Oklahoma. Oklahoma is 18-21 but grandmother today said she talked to the bank where the UGMA is held and she was told that because our daughter is now 18, she's the only one who can make withdrawals from it.

    In cany case, I'm still hoping to get as much advice as possible on the best way to proceed without putting our daughter's entire financial aid package at risk. (Perhaps I am worrying excessively. ) I want to have all info together before we tell our daughter about this account this weekend during our phone call, since our opportunities to speak with her are limited.
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  • BelknapPointBelknapPoint 4699 replies17 threads Senior Member
    My husband talked to his mother and she told him that she couldn't withdraw or transfer anything now that our daughter is 18.

    If the ability or right of the account custodian to manage the account assets has terminated because the beneficiary has attained the legal age of majority, then the account should be turned over to your daughter (and she will then be able to withdraw or transfer the money).
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  • JulyAugust321JulyAugust321 12 replies1 threads New Member
    Thanks, @BelknapPoint. Of our 3 apparent options, which would you say is the best course of action?
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  • BelknapPointBelknapPoint 4699 replies17 threads Senior Member
    Did your daughter give you or your husband a Power of Attorney before she left for Africa?


    This is a good lesson in why keeping a UGMA/UTMA account a secret has way more dowsides than upsides.
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  • JulyAugust321JulyAugust321 12 replies1 threads New Member
    edited December 2019
    Did your daughter give you or your husband a Power of Attorney before she left for Africa?



    This is a good lesson in why keeping a UGMA/UTMA account a secret has way more dowsides than upsides.


    No power of attorney that I am aware of.


    It wasn't our secret and we are more interested in how to solve our own problem than lessons right now.

    edited December 2019
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