<p>UGMA 529s are treated the same as parent-owned 529s.</p>
<p>As far as withdrawing all 529 money the first year, that’s not necessarily wise because then you give up the benefits of another 3 years of tax-free earnings (assuming the 529s are in age-based allocations, mostly interest-bearing investments, but even some equities will most likely have a positive return over 3 years). If you have $40,000 in a 529, it adds $2240 to your EFC. If you have $40,000 in a student’s savings account or UGMA, it adds $8000 to your EFC. If the choice is between spending down savings in the student’s name vs spending down a 529, the best bet is to spend down any savings that are in the student’s name. But you’ll have to run the calculations and see what makes most sense for your particular situation.</p>