What do you mean you only have a year for the UTMA to be withdrawn--that makes no sense in context of aid computations. Whether ot not the custodian delivers the UTMA to the kid at age is not relevant. Its an aid killer in any context.
Its NOT invisible as a UTMA or as assets directly held by child.
You can "cure" the aid problem under current FAFSA rules by repositioning the UTMA to a UTMA/529. Congress says so-Congrees says to treat UTMA/529 as invisible...- (Private institutions using the private methodology may think otherwise)
By LT I meant long term gain. 529 plans are funded with cash only so to fund it from a UTMA requires liquidation of the existing assets to cash . The proces of liquidation may trigger some short term and/or long term gains--which are taxable. But this gain income doesn't even get reported until the NEXT aid cycle so its not there on the forms to influence the initial nee package--which may be the benchmark package.
You need to crunch your own math. If youave a UTMA or student assets of say $50,000 held stubbornly in place it could wipe out elgibility upwards of $55,000 of aid over 4 years or more if junior take 5 years or heads to graduate school.
If that UTMA represents $10,000 of gain which is recognized just after turning 18, past the kiddie tax problem the taxes may run in the $500 range and at worst may run $1500 range---now its swap $500-1500 for $55,000 anyday--besides I'd still owe the 500-1500 at some later time anyway.
The fact that somebody created this invisible bucket is not here for moral debate (On suspects folks may try to undo this bucket--but for now its here!)