529 ownership question

dodgersmom
Sun, 24 Jun 2012 23:10:33 +0000

. . . we count the trust money as the child’s asset.



Well, that’s the problem, isn’t it? If it’s the child’s asset, it’s safe from grandparent’s (or parent’s) creditors, but it will be used up to pay for college. But if a grandparent (or parent) owns the 529 account . . . well, it’s vulnerable to seizure by grandparent’s (or parent’s) creditors.

And, just for the record, I’m not saying save the money, get massive grants from school, and then go out and buy a Jaguar when you graduate. But if the fund is limited, then it makes sense to stretch it out as long as possible, especially if the student’s education is anticipated to take more than four years. For some families, depending on circumstances, a small college fund (set aside in a better economy) may be the only way to cover the family’s EFC. If the fund becomes a student asset, then all of a sudden that fund doesn’t stretch so far.

By the way, a bit of research has revealed that slightly more than half the states provide asset protection for 529 accounts. But slightly less than half do not. And the family that’s fallen on hard times and needs that account to stretch for all four years might well be the same family that has creditors at the door. So what’s the solution?