{"id":223,"date":"2017-03-11T16:10:47","date_gmt":"2017-03-12T00:10:47","guid":{"rendered":"https:\/\/thekyo.me\/wordpress\/?p=223"},"modified":"2017-03-11T16:10:47","modified_gmt":"2017-03-12T00:10:47","slug":"529s-parents-vs-grandparents","status":"publish","type":"post","link":"https:\/\/thekyo.me\/test\/2017\/03\/11\/529s-parents-vs-grandparents\/","title":{"rendered":"529s: Parents vs Grandparents"},"content":{"rendered":"<p>As promised here is a follow up on the implications of a 529 from Parents vs the Grandparents. \u00a0Most of the complexity stems from how the 529s are viewed with regards to the expected contribution calculations below.<\/p>\n<p><strong>Parent&#8217;s Assets:<\/strong> Reduce aid by up to 5.64%<br \/>\n<strong>Kiddo&#8217;s Assets:<\/strong> Reduce aid by up to 20%<br \/>\n<strong>Kiddo&#8217;s\u00a0Income:<\/strong> Reduce aid by up to 50%<\/p>\n<p><strong>Note:<\/strong> I&#8217;m not really going to talk about Kiddo&#8217;s assets, but if you have opened a custodial account (usually a\u00a0<a href=\"http:\/\/www.finaid.org\/savings\/ugma.phtml\">UGMA\/UTMA<\/a>) these will fall under that category.<\/p>\n<h2>For Parents<\/h2>\n<p><strong>Pros:<\/strong><\/p>\n<ul>\n<li>Tax free growth of assets<\/li>\n<li>As you use it, it gets used up and\u00a0affects aid less (because you have less assets)<\/li>\n<\/ul>\n<p><strong>Cons:<\/strong><\/p>\n<ul>\n<li>529 assets are counted towards kiddo&#8217;s FAFSA calculation (part of the <a href=\"https:\/\/fafsa.ed.gov\/help\/fftoc01g.htm\">expected family contribution<\/a>) and parent&#8217;s assets reduce financial aid by a\u00a0maximum of 5.64%.<br \/>\n<strong>Example:<\/strong>\u00a0A parent&#8217;s 529 valued at\u00a0$10000 reduces kiddo&#8217;s financial aid by $564<\/li>\n<\/ul>\n<h2>For\u00a0Grandparents<\/h2>\n<p><strong>Pros:<\/strong><\/p>\n<ul>\n<li>Tax free growth of assets<\/li>\n<li>Assets in the 529 are not counted towards kiddo&#8217;s FAFSA calculation<\/li>\n<\/ul>\n<p><strong>Cons:<\/strong><\/p>\n<ul>\n<li>When kiddo takes a distribution from the Grandparent&#8217;s 529 it is considered income for the kiddo. \u00a0This <strong>used<\/strong> to affect <strong>next year&#8217;s<\/strong> aid, but there seems to be a <a href=\"https:\/\/studentaid.ed.gov\/sa\/about\/announcements\/fafsa-changes#changes\">new rule<\/a> where\u00a0income now affects <strong>next next year&#8217;s<\/strong> aid (e.g. income in 2015 affects eligibility for 2017-2018 school year)<br \/>\n<strong>Example:<\/strong>\u00a0Kiddo takes $10000 out of grandparent&#8217;s 529. \u00a0 Aid for in 2 years could be reduced by $5000<\/li>\n<\/ul>\n<h3>Mitigation Plans<\/h3>\n<ul>\n<li>Communicate and plan distributions between parents and grandparents. \u00a0It would be horrible to have both pull money out and there not be enough qualified expenses to cover the withdrawals.<\/li>\n<li>Grandparents can deposit in the parent&#8217;s 529 (if the plan allows) or give cash to the parents (up to the <a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/frequently-asked-questions-on-gift-taxes#5\">gift limit<\/a>,\u00a014k for 2017)<\/li>\n<li>Grandparents can transfer the ownership of the 529 to the parents (not all 529s allow this so check)<\/li>\n<li>Grandparents can strategically time payments for college. \u00a0Due to the <a href=\"https:\/\/studentaid.ed.gov\/sa\/about\/announcements\/fafsa-changes#changes\">new rule<\/a>\u00a0 grandparents should aim to pay for senior and junior years. \u00a0Assuming graduation after senior year, the income from these years never affect financial aid.<\/li>\n<\/ul>\n<p>Ultimately if kiddo doesn&#8217;t qualify for financial aid anyways then none of this matters and\u00a0everyone can reap the benefits of tax free growth on assets for higher education!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>As promised here is a follow up on the implications of a 529 from Parents vs the Grandparents. \u00a0Most of the complexity stems from how the 529s are viewed with regards to the expected contribution calculations below. Parent&#8217;s Assets: Reduce aid by up to 5.64% Kiddo&#8217;s Assets: Reduce aid by up to 20% Kiddo&#8217;s\u00a0Income: Reduce [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","om_disable_all_campaigns":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,4],"tags":[14,20,35,77],"class_list":["post-223","post","type-post","status-publish","format-standard","hentry","category-dadlife","category-finances","tag-dadlife","tag-20","tag-college","tag-saving"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>529s: Parents vs Grandparents - My Dadlife<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/thekyo.me\/test\/2017\/03\/11\/529s-parents-vs-grandparents\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"529s: Parents vs Grandparents - My Dadlife\" \/>\n<meta property=\"og:description\" content=\"As promised here is a follow up on the implications of a 529 from Parents vs the Grandparents. \u00a0Most of the complexity stems from how the 529s are viewed with regards to the expected contribution calculations below. 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