RE: 529 account and Fin. Aid

[musicalbabe85]

I came across an article a few months ago stating that any accounts that are in your child's name can substantially hurt them when it comes time to get financial aid for school. Because of this, my daughter's savings account is in my name along with DH. I was wondering if I put her as the beneficiary on a 529 account, will that count as her account or mine? What would be the best way to go about opening and starting her 529 also? I was going to use the financial advisor that works at my bank but she is transferring to a different branch that's a good drive away from me, so I've thought about opening it online. I'm just thinking if I go through my bank (for whom I work) I could probably forego any fees...something I need to check into.

[InDebtInDC]

The fact that the child's account is in your name doesn't change anything because all 3 people's assets will have to be declared on the FAFSA, unless you can claim independence status for your child, which generally involves at least one of the following:

a) the child is 24+ years old,
b) the child has already received a 4-year degree,
c) the child can furnish proof of financial income for 1 calendar year prior to enrollment to establish independence and zero dependence on you.

If you can do any one of these, the parents' assets do not have to be declared on the FAFSA. This is current as of right now. Title 4 of the US Code may be amended in the future though, and who knows what will happen by the time your child is old enough to go to school. But this is how it is right now.


I was also faced with the same problem with my godchild. We solved it by opening a 529 in my name as the accountholder, and designating the child as the beneficiary.

Had I designated her parents as the accountholders, they would have had to declare the 529 on their FAFSA and would therefore be faced with reduced need-based aid eligibility.


So in general, the child and the parents' assets will have to be declared on the FAFSA. As far as I know, and this may change in the future, a 529 in someone else's name designating the child as the beneficiary does not need to be declared on the FAFSA.


All other assets in the child' or parent's names will have to be declared, and may affect need-based aid eligibility. If you divorce, then the child will have to declare income from the parent's household responsible for more than 50% of the child's support. I believe that if you have 50/50 joint custody, both households will have to declare their assets, but I'm not sure on this one because I was able to avoid doing this by claiming 51%+ support from one household.


Does that answer your question?