Mark, thank you so much. If I can impose a bit more, I'm a little confused so I am posing a question alongside your reply in bold ALL CAPS only for easy recognition.
The Higher Education Act of 1965 specifies that a qualified tuition benefit (529 college savings plan, prepaid tuition plan or Coverdell education savings account) is considered to be an asset of the student if the student is an independent student or an asset of the parent if the student is a dependent student, regardless of whether the owner of the account is the student or the parent. BASED ON THIS PARAGRAPH, IF I OWN THE 529 PLAN AND MY DAUGHTER IS A TAX DEPENDENT IN THE YEAR SHE STARTS GRADUATE SCHOOL, THEN IT'S NOT HER ASSET, BUT IF SHE IS NOT A TAX DEPENDENT AT THAT TIME, THEN IT COUNTS AS HER ASSET? IS THAT WHAT YOU'RE SAYING? AND WHAT IS THE RELATIONSHIP BETWEEN THE HIGHER EDUCATION ACT AND FAFSA?
Thus, a parent-owned 529 plan is not reported on the Free Application for Federal Student Aid (FAFSA) of an independent student because parent information is not reported on an independent student's FAFSA. I THOUGHT BASED ON YOUR PARAGRAPH ABOVE THAT IF SHE IS AN INDEPENDENT STUDENT MY PARENT OWNED 529 WOULD BE CONSIDERED HER ASSET? A student-owned 529 plan is reported on an independent student's FAFSA. (A graduate student is considered to be an independent student.)
Note that distributions from a 529 plan that is not reported as an asset on a student's FAFSA will be reported as untaxed income to the student on a subsequent year's FAFSA. Thus, distributions from a parent-owned FAFSA that lists a graduate student as the beneficiary will have to be reported as untaxed income to the graduate student on a subsequent year's FAFSA. Since the FAFSA is on a prior-prior year system, such a 529 plan distribution will be reported as untaxed income on the FAFSA two years after the distribution. SO AM I READING THIS PARAGRAPH CORRECTLY? THE DISTRIBUTION FROM A PARENT OWNED 529 WOULD NOT BE TAXED BUT YOU'RE SAYING THAT SAME DISTRIBUTION WOULD LATER BE REPORTED ON A FUTURE GRADUATE SCHOOL FAFSA AND COUNT AS INCOME FOR THAT FUTURE DETERMINATION FOR THE NEXT TWO YEARS OF GRADUATE SCHOOL? THANKS SO MUCH AND PLEASE FORGIVE ME FOR BEING DENSE!