Hi,
Grandparent wants to contribute to the grandchildren's college expenses. We're trying to decide if it makes sense for the grandparent to own the 529 plan or if it's better to give the parent the cash and have the parent be the owner of the 529 plan.
Grandparent's advisor is telling them to set up the 529 in their own name because the assets won't show up on the kid's financial aid forms. (Confirmed on savingforcollege.com: "If a parent owns the 529 account or ESA, up to 5.6% of the value is included in EFC. If grandparents own the account, none of the value is included.")
Sounds fine except that savingforcollege.com also says:
"Withdrawals from parent- and student-owned 529 plans and ESAs are also treated advantageously. Such withdrawals when used for college are excluded from your federal income tax return, and according to the U.S. Department of Education are not required to be "added back" when reporting your family income on the student's federal financial aid application. Withdrawals from a grandparent-owned 529 account, however, may have to be reported as student income, reducing financial aid eligibility by as much as 50% of the amount of the withdrawal."
It's the last sentence that worries me.
Are we turning a potentially 5.6% asset into income that would be looked less favorably on for financial aid formulas? Anyone have experience in this arena?
Thanks so much!
Dana