Alright smarter than me FBGs, got into a discussion last night with my brother in law, mother in law, etc. about financial aid for college, saving accounts , etc., and figuring out the best ways to go about this to maximize financial aid eligibility, etc. (for reference, my oldest is a sophomore in high school)
Long story short - my nephew will be freshman next year attending an Ivy League school, and his parents have been doing all the financial aid applications etc. - the unique part of his situation is that he will be playing football for the school, so there is some assistance through that, but is is based on what additional aid they are able to get and also looking at the standard contributions expected from parents/students.
Adding into the equation, and where the main part of our conversation went, is that my mother in law has set up two account for each of her grandkids - one is a 529 plan which has the obvious intent of being used to assist in funding their education, the other is set up as a UGMA account and her intent is that she wanted each kid to be able to use that however they wanted, ideally for travel, etc. Each 529 plan is in her name with the grandchild as beneficiary, I believe the UGMA accounts are just in the kids name.
My understanding from what I've been able to gather is that the 529 account, as it is not in our son's name and is not in our name (we have a separate 529 that we are the owner of), it is not counted as part of the FAFSA calculations, but it is counted in the CSS/Financial Aid PROFILE form and distributions can severely affect eligibility for following years.
Essentially we are trying to figure out the best method, legally, to shield the assets as much as possible so that they have a minimal affect on the financial aid calculations, and so that the kids can best use the funds for their intended purpose.
Here is one site I found that went into some detail about the affect different types of accounts had on the financial aid piece
Some options discussed (not necessarily by me, but they came up as options that my brother in law either considered, or other families they knew did):
Cash out/close the UGMA account, child then turns funds over to parents who can place it into a protected account/asset - paying down house if there is a mortgage was mentioned, with parents then pulling that money out down the road to give back to the kids.
For 529, was suggested changing the beneficiary to a younger child or other eligible person, and then in final year of college, change back after financial aid calculations were completed and use distributions to pay for final year, as there is no longer need to reduce income of the student for calculations.
I don't recall the other suggestions that came up, but these were the main concerns that came up - what's the most beneficial account type, account owner/beneficiary structure or method to maximize these funds and financial aid eligibility.
My basic thought is that it really required a thorough discussion with a financial professional well in advance of the application process, as from my understanding they look back two years on taxes, etc., so any changes/adjustments need to be done sooner than later, and I also wanted to be sure anything that was done was both legal and also not really even in the gray area.
So, all that said, FBG financial pros and those that have gone down the paying for college trail, what, if any advice, do you guys have?
Long story short - my nephew will be freshman next year attending an Ivy League school, and his parents have been doing all the financial aid applications etc. - the unique part of his situation is that he will be playing football for the school, so there is some assistance through that, but is is based on what additional aid they are able to get and also looking at the standard contributions expected from parents/students.
Adding into the equation, and where the main part of our conversation went, is that my mother in law has set up two account for each of her grandkids - one is a 529 plan which has the obvious intent of being used to assist in funding their education, the other is set up as a UGMA account and her intent is that she wanted each kid to be able to use that however they wanted, ideally for travel, etc. Each 529 plan is in her name with the grandchild as beneficiary, I believe the UGMA accounts are just in the kids name.
My understanding from what I've been able to gather is that the 529 account, as it is not in our son's name and is not in our name (we have a separate 529 that we are the owner of), it is not counted as part of the FAFSA calculations, but it is counted in the CSS/Financial Aid PROFILE form and distributions can severely affect eligibility for following years.
Essentially we are trying to figure out the best method, legally, to shield the assets as much as possible so that they have a minimal affect on the financial aid calculations, and so that the kids can best use the funds for their intended purpose.
Here is one site I found that went into some detail about the affect different types of accounts had on the financial aid piece
Some options discussed (not necessarily by me, but they came up as options that my brother in law either considered, or other families they knew did):
Cash out/close the UGMA account, child then turns funds over to parents who can place it into a protected account/asset - paying down house if there is a mortgage was mentioned, with parents then pulling that money out down the road to give back to the kids.
For 529, was suggested changing the beneficiary to a younger child or other eligible person, and then in final year of college, change back after financial aid calculations were completed and use distributions to pay for final year, as there is no longer need to reduce income of the student for calculations.
I don't recall the other suggestions that came up, but these were the main concerns that came up - what's the most beneficial account type, account owner/beneficiary structure or method to maximize these funds and financial aid eligibility.
My basic thought is that it really required a thorough discussion with a financial professional well in advance of the application process, as from my understanding they look back two years on taxes, etc., so any changes/adjustments need to be done sooner than later, and I also wanted to be sure anything that was done was both legal and also not really even in the gray area.
So, all that said, FBG financial pros and those that have gone down the paying for college trail, what, if any advice, do you guys have?
