I've heard it stated for several years (perhaps erroneously)
that 529 plans (both regular and 529/UTMA) don't get included on
the FAFSA finaid application.
However, I was just looking at the 2011-2012 application and
its instructions and it clearly states that 529 plans (whether
owned by the parents or by the dependent student) are to be
included in the calculations.
Is that a new change?
Rich Carreiro firstname.lastname@example.org
"[The College Cost Reduction and Access Act of 2007 with an effective
date of July 1, 2009] corrected a legislative drafting error in the
Higher Education Reconciliation Act of 2005 which temporarily caused
custodial qualified tuition accounts to be disregarded as assets on
the Free Application for Federal Student Aid (FAFSA) in 2006-07,
2007-08 and 2008-09."
This and other possibly relevant details appear at
On Sun, 27 Feb 2011 09:15:35 CST, Elle
Thanks for the answer. It is for this reason that grandparents and
other relatives are excellent candidates for ownership of 529s.
Which brings me to a related question: Other than the gift tax rules,
is there a problem with the parent gifting ownership to someone else?
I believe they are countable assets when it comes to medicaid
eligibility. So you run the risk of grandma or grandpa spending your
savings on a nursing home instead. And that the gift is irrevocable,
but the 529 plan is revocable. Is some scamster gets hold of the
grandparents, they could bilk them out of the money in the 529 plan.
I actually personally know of a case where the "financial planner"
convinved the grandparents that they should turn over the funds to
him, and he would deliver much higher returns than the 529 options
ever could. Naturally it was mostly blown on options and derivatives
trading in the investment manager's account.
YMMV of course, but this is in no way a no brainer.
"HW \"Skip\" Weldon" writes:
One of the things which may have made this seem more confusing is
that the rules for FAFSA treatment of 529s have, indeed, changed.
When the 529 was first introduced, it was considered an asset
of the *child* not the parent at first. That was a terrible
situation. Now it's considered an asset of the account owner
(usually the parent), not the beneficiary. Yet at the same time,
the assets in the 529 are not in the owner's estate. It's
It's not clear to me what the consequences are, nor, as far as
I know, has it been tested. Contributions to a 529 are, for
gift and estate tax purposes, considered a completed gift to
the *beneficiary*. So a change in ownership in theory should
not have any tax implications. Yet presents a theoretical
loophole. Apparently some states have put rules in place to
at least limit this by limiting changes in ownership to
other family members similar to the limits in changes of
If anyone has experience with the treatment of changes in
ownership, I'd really love to hear about it.