FAFSA and student savings

<p>I cannot believe that FAFSA time is nearing already! Because student's savings accounts are "taxed" so heavily, does anyone move that money around into other accounts? I know this is a bit sneaky, but I need every penny I can get!</p>

<p>No. Nobody does that it. It would be a federal felony to move the funds from the student to another person, in name only, and not report them on FAFSA. Some people use the student's funds to prepay for necessities, like a car, clothes or computer if one will be necessary. Nothing wrong with that. Can be done up to the date the FAFSA is submitted.</p>

<p>I posted the link to an article called "UTMA Regret" that deals with just that. You can find it in the Finaid section of the old CC.</p>

<p>Move the money into UTMA/UGMA if not already. Look for dividends not interest since dividends taxed differently than interest. If in mutual funds then already in UGMA then look for capital gains and loses since gains have a maximum tax of 20% (less if kid's bracket is lower) and loses fully deductible up to $3000/yr.</p>

<p>Also think about a 529 plan for your state. Amount contributed into yur state's 529 is generally deductible to income at state level. If kid is within 2 years of college be very conservative.</p>

<p>UGMA's and 529's are tax ploys. Reduction to taxes could be considerable if you have planned years ago. May not be much help and perhaps dangerous if kid is nearing higher ed.</p>