<p>Daughter has $12K in her savings account (under her SS#). Would moving this money into the parents savings account this week be a wise thing to do before filing the 2009 FAFSA? This move would bring the child’s assets close to zero.</p>
<p>No, not at all . I was told that unless you kept the money in a mattress , it can’t be moved to make things appear to be different than they are.
Be honest.</p>
<p>Won’t your daughter have Interest Income on her 2008 Tax Return? That is a big giveaway right there, that she has assets & she received Interest Income. I would think that anybody who works in FA office would see that as a red flag & then ask what happened to this money? I’m sure other CC’s who work in Financial Aid can comment.</p>
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Well, I’m not at all advocating that anyone hide assets, but this would not necessarily be true. Last summer, my son spent almost $10,000.00 of his savings earning his private pilot’s license. I expect that his 2008 tax return will show both dividend income and the sale of the mutual fund shares, but he will no longer have the asset to spend on college next year.</p>
<p>Since the savings account is in your daughter’s name and under her SSN, it can only be moved to another account that’s titled in the same way. You have two choices to take this money out of the FAFSA equation:</p>
<p>1) spend it on something that would benefit the child (a new car?) or
2) move it all to a child-owned 529</p>
<p>Option #2 can be accomplished at any brokerage that offers 529s.</p>
<p>We opened a Fidelity 529 a couple weeks ago. Took about 20 minutes online, and were able to transfer funds online. Pretty simple, no set up charges, 1/2% mgmt fee. Various plans within the 529 for investing, depending on the current age of the student (higher stock market exposure for the younger kids, very small stock market exposure for the older kids). This was our state CA plan-- lots of different state plans avail.</p>
<p>As long as the savings account is not a custodial account (UGMA or UTMA) you can move the money. The custodials are the types of accounts with all the restrictions on moving money. A standard savings account does not have that restriction.</p>
<p>There are also all kinds of things she is going to need for college itself (computer, dorm stuff, etc). You could knock out a lot of that savings account in short order.</p>
<p>Time to spend down the account. Nothing wrong with doing that.</p>
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<p>Not true, it’s very easy to move money from a UGMA to a child-owned UGMA/529, as long as we’re talking about the same child, of course. I did the same thing as sblake; opened a child-owned UGMA/529 for both sons, and transferred cash from both of their UGMAs into the UGMA/529s. Everything was at Fidelity since Fidelity manages the plan for California, but any brokerage that offers 529s can do this.</p>
<p>I agree that custodial (UGMA) accounts have restrictions, but transferring to a like-titled 529 account isn’t one of them.</p>
<p>Isn’t the child allowed to gift up to $12K?</p>
<p>By any chance is it a joint account, in your name too and your SS#? If it is not UGMA then it may have had to have an adult on the account, which means it could be considered your asset??</p>
<p>My daughter’s $12K savings account appears to be a UGMA type costodial account. She just turned 18 (Nov. 2008). Based on the responses so far, it seems like the best option for FAFSA treatment would be to move the money to a child-owned UGMA/529 prior to filing her FAFSA. Can I still do this now in Jan. 2009 and then flie the 2009 FAFSA (early Feb.) to gain a more favorable treatment of this asset?</p>
<p>Yes, you can make a transfer from a UGMA to a UGMA/529 at any point prior to filing FAFSA. However, depending on the laws of your state, the UGMA might already be in the process of being converted to a non-custodial account in your daughter’s name (some states do this at 18, while in others it’s 21). Your brokerage firm will be able to help you with all of this.</p>
<p>Our original college savings account was joint with our daughter (not a UGMA or UTMA), but in my wife’s SS#. We created a 529 college savings account with me as the owner, and daughter as beneficiary. Withdrawals have to be for college (but can include room and board and misc expenses, as well as tuition). Gets reported as a parental asset on FAFSA, so gets the favorable treatment of the asset protection allowance, and the 6% assessment above that, instead of the 20% with no protection allowance.</p>
<p>(fishinschool): I created and transferred ours just a day or two before filing FAFSA.</p>
<p>Here’s a link to a site that compares the various state 529 plans:</p>
<p>[Compare</a> 529 Savings Plans](<a href=“http://www.archimedes.com/fmr/comp529.phtml?refpr=colSchsh15]Compare”>http://www.archimedes.com/fmr/comp529.phtml?refpr=colSchsh15)</p>
<p>And here’s the site that acts as a portal to California’s 529 plans (called Scholarshare and run by Fidelity):</p>
<p>[California</a> 529 Plan (Scholarshare)](<a href=“http://www.scholarshare.com/]California”>http://www.scholarshare.com/)</p>
<p>There’s a link at the bottom to set up the 529 online.</p>
<p>You’ll have a choice between managed (more expensive) and index (the equity portion of the portfolio tracks a stock index), and also an opportunity, at least in the case of the CA 529’s, to select a portfolio based on risk and expected time until funds are needed.</p>
<p>When I refer to moving the money, I should clarify. Custodial accounts cannot be moved out of the student’s name, there are types of assets you can move the money to in the student’s name which will mitigate some of the negative impact.</p>
<p>Your best move is to move the money to a 529. It’s not too late to do that now, prior to filing the FAFSA. Once the 529 is created, then show the $12k as a parent’s asset not the child’s asset. This seems wrong but Congress passed a law recently that allows 529’s – regardless of who owns the 529 – to be shown as parent’s asset.</p>
<p>Moving my kid’s money to a 529 and reporting as parent’s asset made a HUGE difference in financial aid (for the better!), but YMMV.</p>
<p>Since my daughter worked and earned $3K in 2008, would contributing $3K into her existing Roth account and moving the remainder $9K into a child-owned UGMA/529 be a better strategy than moving the entire $12K into a child-owned UGMA/529 for FAFSA reporting?</p>
<p>Moving it to an IRA would eliminate it from the FAFSA calculations completely as opposed to the parents assesment. 0% is always better than 6% penalty.</p>
<p>If you expect your daughter will be working in 2009 similar to 2008, then you can move another $3,000 for 09 for a total of $6,000 to the IRA.</p>