529 - which child should be named if you have more than one
I suspect if you put the 529 in your youngest child’s name, then it won’t count against your oldest child when you fill out the FAFSA - can you always move it over to another child once you know who needs what?
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FAFSA ignores a lot of relevant data including primary residence home equity, retirement accounts, family-owned business assets (under 100 employees) and projected current year and next year earnings. Parent assets are assessed at a maximum rate of 5.64% of their value after accounting for an asset protection allowance
CSS/Profile which is used by most private colleges to inform institutional financial aid eligibility asks about all family members who are 529 plan beneficiaries and the plan balances. It also asks about non-parent owned 529 plans. Presumably the question is to flag significant imbalances between siblings or other family members and not to assign the total to one student.
How are you setting this up? It's usually the adult (eg parent or grandparent) as account owner, with a named beneficiary. For our son and daughter, we have a 529, then there is an account for one kid and one account for the other kid. That way they have their own contributions in each one. We've found that much easier to monitor how each account is coming along, and it's easier to shift allocations from more aggressive to more conservative as each kid gets older.
You want to open an account for each child. Changing the beneficiary is generally understood to reset the 15 year clock for a potential rollover to Roth IRA. And you can move assets between immediate family members anytime (have to wait 5 years to roll to Roth). Plans could have limits on how many transfers you can make in a year.
Thank you!!
You could do that, but why? The rate at which parental assets are considered part of the expected family contribution (EFC) for a child's education is around 5%. So, if the 529 is in the parent's name (FBO the child), and it has a balance of $100,000, then only $5,000 is counted as part of the EFC. Playing a shell game by putting the plan in the name of one child and then moving it after submitting the FAFSA seems like a lot of paperwork, with potential for mistakes, for not a whole lot of benefit.
Also, you might want to check if there is a lookback on transfers of assets. I don't know if there is one for higher education-related programs, but there well could be.
Great point! It is only 5%
I guess it might be useful for people with lots of kids but it’s really NOT a significant amount at that percentage
(edited to add NOT)
It depends on the size of 529 if you have 200k that is 10k a year on expected family contribution savings or 40k over the 4 year college term by reallocating between 529. We have 4 kids and are looking at optimizing 529 balances for the older kids to improve affordability.