<p>Does anyone know if a former spouse can be compelled to direct 529 and/or UTMA funds to the child/beneficiary’s college costs? My ex-spouse is the custodian of both 529 and UTMA accounts that were set up by his grandmother for the grandchildren’s future college educations. Is it permissible for him to use some of that money toward his child’s college costs and keep some for himself? He repeatedly states he will pay his 50% of costs.</p>
<p>Does the FAFSA and/or most colleges require that students’ 529 funds be drained first prior to assigning aid awards? How can I determine if these will be viewed as student assets or parental assets?</p>
<p>What access/rights do the children/beneficiaries have, if any at all?</p>
<p>Unfortunately, my divorce agreement does not address college costs at all.</p>
<p>A recent visit to a family law attorney suggested the possibility of modifying the divorce to stipulate how college costs are to be paid. The divorce occured in Maine in 2005 and we now reside in a non-married partnership in Massachusetts.</p>
<p>We are trying to assess the benefit of pursuing legal modification – any/all feedback would be greatly appreciated!</p>
<p>Thanks</p>
<p>I’m no expert, but I my understanding is that UTMA accounts would belong to the kids and your ex would have no right to any of the money in them. If the 529 account is a UTMA account then it belongs to the child whose name it is in. But if the 529 account is set up where your ex is the owner and the child is the beneficiary then your ex has more control over the money.</p>
<p>The above is correct - if the child is the beneficiary of the UTMA account, then legally the funds belong to the child. They don’t necessarily need to be used for college, but they can only be spent for the benefit of the child. The father (or whoever is the custodian) cannot legally use those funds for himself. When the child reaches legal age (18 or 21, depending on the state) then the child can request that the UTMA be converted to an account titled in the child’s name only, removing the custodian’s name from the account. </p>
<p>For 529s, there are generally 2 ways that the accounts are titled. The most common way is for an adult to own the account and name a beneficiary. The adult owner has the option of changing the beneficiary at any point, from child 1 to child 2, for example. Or the adult owner can liquidate the 529, paying penalties and taxes on the gains, and keep the money. The 2nd way a 529 can be titled is to be owned by the child, with an adult custodian. This is usually the case when the funds originally came from a (child-owned) UTMA and were transferred directly to the 529. In this case, the beneficiary can’t be changed because the original funds were owned by the child. </p>
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<p>No - how you finance college is up to you, there’s no “order” that funds must be spent. College accounts such as 529s are assessed at the rate of 5.6% for FAFSA, while UTMAs are assessed at the rate of 20%. The latter assumes (but does not require) that about 20% of the UTMA will be used every year to pay for college.</p>
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<p>529s, when owned by the parent or by the child, are always considered parental assets. When owned by the grandparent, due to a loophole in the FAFSA formula, they are not reported at all on FAFSA.</p>