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#43284 - 05/09/08 07:09 AM Granddaughter / Legal Guardian as Dependent
jimcfp jimcfp Registered: 05/08/08 Posts: 3	I have a client whose granddaugher lives with he and his wife (they have legal custody.) He has money saved for his granddaughter's education in both a 529 and an UGMA account. Her folks are divorced and out of the picture (not deceased.) With regard to the FAFSA application and the 529 inclusion, would the grandfather's assets be looked at and would the 529 be counted as an asset of the granddaugher's or his? I'm assuming it would not be counted as either. Would she apply as a dependent? Would she have to track down tax returns from her parents to verify their assets and income? Thanks! Jim
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#43285 - 05/09/08 10:09 AM Re: Granddaughter / Legal Guardian as Dependent [Re: jimcfp]
Drew Drew Registered: 01/09/00 Posts: 2478	The UGMA is fatal to aid and I suggest your client review with counsel just how creative the custodian can be without going to wrong side of any applicable law to make it go away from the count. There appear to be multiple tools custodian can use. Not clear in post who is custodian.. Ordinarily a 529 owed by anybody but the child or custodial parent is OUT of the asset count. What may appear as logical or intuitive to some may not be exactly what the rules say. I have not looked in FAFSA fine print about if ones guardians or custodial persons assets as in the count. It would seem illogical that they do--but remember nothing is logical per se. I further note that even if some FAFSA intrepretation says guardians assets count--that a 529 is not at all necessarily an asset of its owner but of its beneficiary--with some debate as to priority of state property laws vs a federal tax issue--I frankly doubt the rules address your fact pattern--and I know what I'd do in such a case. In my state it would be easy to change the 529 ownership to further remove it from the equation at hand. There might be some clues as to if GP's custody carrys with it a statutory duty to provide for child --but even if its there I doubt FAFSA gets state specific. While there seems to be provision for special cases I would NOT go out of my way to shop for an answer I did not want. Clearly one can anticipate that if a child has "zero" ability to pay by literal use of the rules but some much more affluent person, not necessarily even a relative,that some reviewer may make a social decision that says kid you go get money from affluent host. Don't invite folks to invent answers. _________________________ Drew
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#43286 - 05/09/08 10:34 AM Re: Granddaughter / Legal Guardian as Dependent [Re: Drew]
Drew Drew Registered: 01/09/00 Posts: 2478	Several sources such as TexasAIE and UCDavis post answers to the question--absent adoption the foster parent or GPs or wahtevers assets/income are no there as parent . The are NOT in parents shoes. From Taxas AIE "Student Lives with Foster Parents or Grandparents A "parent" is defined as a biological or adoptive parent. Foster parents and others acting "in loco parentis," such as grandparents, are not considered parents for the purpose of applying for financial aid. In this situation, a student should report the parental information of the parent who has provided the most financial support, or the parent who provided the most support the last time support was given." Note this suggests that GP's engineer even the most token of recent support to qualify same , from the parent whose financial status is most likley to max out the aid equation? Or if both are duds then to engineer the one with greater cooperation as to required information. _________________________ Drew
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#43287 - 05/09/08 02:51 PM Re: Granddaughter / Legal Guardian as Dependent [Re: Drew]
jimcfp jimcfp Registered: 05/08/08 Posts: 3	Thanks Drew. I appreciate your thoughts on this unique situation. I also thought that the duty to provide would define the granddaughter as a dependent, and would then have assets / income of the GP included in her eligibility calculation. I am unclear as to whether their assets would be included in a calculation if they included her on as a dependent on their tax return. Thanks again! Jim
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#43289 - 05/09/08 03:14 PM Re: Granddaughter / Legal Guardian as Dependent [Re: jimcfp]
Drew Drew Registered: 01/09/00 Posts: 2478	Some of the other stuff I read seems to make it clear to me that tax dependency is NOT the relevant issue for a FAFSA form, whats relevant for FAFSA is just what the form says is relevant--and that is the parent or kid. Unless you are into an adoption situation. I think Texas and UC probably used source docuements--but go to source docuements re FAFSA _________________________ Drew
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#43292 - 05/09/08 04:06 PM Re: Granddaughter / Legal Guardian as Dependent [Re: Drew]
Drew Drew Registered: 01/09/00 Posts: 2478	Actually it makes a whole lot of sense--if the couple down the street cannot cope for some reason and I take in thier child as official custodian or even unofficial one (which still allows me to claim them as tax dependent if facts fit) why should that childs college aid picture be influenced + or - by my picture? Consider the reverse--we'd have some uppermiddle class folks shedding kids to impoverished friends and relatives so as to up the aid equation. Don't laugh, variations of that game exist in my state with public schools which allow folks to shop schools or dump kids by an "affadavit of support" which can be written on back of a used envelope. _________________________ Drew
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#43294 - 05/09/08 11:18 PM Re: Granddaughter / Legal Guardian as Dependent [Re: Drew]
TexasCFP TexasCFP Registered: 08/23/01 Posts: 756	Jim: The biggest problem I've experienced in similar cases is getting accurate financial info from the parents, as the FAFSA will require this. Asset and income info from the parent that provided the most support is what's expected. If neither provided any support then I use the one that provides the lowest EFC. If they aren't available or won't cooperate you're faced with estimating and then clarifying if selected for verification or filing without parent info and then trying to explain the situation to the school's Fin Aid Office. Good luck! _________________________ David Hollands, CFP
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#43295 - 05/10/08 03:22 AM Re: Granddaughter / Legal Guardian as Dependent [Re: TexasCFP]
itstoomuch itstoomuch Registered: 01/01/06 Posts: 757	UGMA's is not fatal to FA. There are many criteria that can disqualify someone from FA - one of which is grades.
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#43311 - 05/12/08 09:22 AM Re: Granddaughter / Legal Guardian as Dependent [Re: itstoomuch]
jimcfp jimcfp Registered: 05/08/08 Posts: 3	Thanks again to all for your thoughts. Since starting this thread I was on the phone with FAFSA and the Financial Aid Office at Rutgers University. FAFSA thought the situation may qualify for a "Dependency Override" which would change the granddaughter's status from "dependent" to "independent." Rutgers seemed to this this type of scenario would not qualify for the dependency override, which is more often applicable when the parents may be in jail, abusive or impossible to locate. Just another thought / question to pose: If the granddaugher was able to obtain the dependency override, then the GP assets (including the 529 and UGMA) would not be taken into account, correct? I beleive the UGMA distributions, however, would be included as taxable income to her. Thanks again! Jim
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#43312 - 05/12/08 09:29 AM Re: Granddaughter / Legal Guardian as Dependent [Re: jimcfp]
anonymous anonymous Registered: 03/29/05 Posts: 1992	The UGMA is not an asset of the grandparent. The UGMA belongs to her and would be counted as her asset. This is true regardless of whether she is independent or not.
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