Tranfer 529 ownership to daughter after she is married?

[danlisarice]

I have two daughters about halfway through college. Both decided to get married this spring and both have ~$50k left in their 529 plans. Now they will be married I want to stay out of their family finances. I am happy to transfer ownership to them of the plans. I am not worried about how they use it and my point is I don't want to be in control of it. I consider it their money. They can use it on their husband or themselves or just withdraw it although I hope they use it for education. The CO college saving direct 529 plan says I can make them owner and beneficiary and there is no tax implication. My question is, will this cause myself or them any tax issues? Will it impact their ability to get a Pell grant? They will not have a ton of income while they or their spouse are finishing school. Basing the decision on whether to transfer based on their ability to get a grant almost feels a bit unethical since they have the money to finish school, but I pay a lot of taxes so don't feel too bad if they can get a grant. They definitely won't qualify while they are my dependents, but as independent married students their income probably would. Is there a reason why I should not transfer them to be the owners of their 529s?

[dcandmc]

My question is, will this cause myself or them any tax issues?

The act of transferring ownership should not cause any tax issues to you or your daughters.

Will it impact their ability to get a Pell grant?

Maybe, but that depends on more variables than ownership of the 529 accounts.

They will not have a ton of income while they or their spouse are finishing school. Basing the decision on whether to transfer based on their ability to get a grant almost feels a bit unethical since they have the money to finish school, but I pay a lot of taxes so don't feel too bad if they can get a grant. They definitely won't qualify while they are my dependents, but as independent married students their income probably would. Is there a reason why I should not transfer them to be the owners of their 529s?

Off the top of my head:
- Your loss of control of the account (but this doesn't sound like it's a concern you have)
- Potential negative impact on need-based financial aid.

[danlisarice]

Thanks I think what I discovered in research is that the expected contribution on FAFSA woudl be 35% of the 529 as an asset if they own it, but only 5% or so if I own it. But, I think their earned income is so low and this woudl be their only asset woudl not impact grant size very much when I ran it through a calculator

[dcandmc]

Thanks I think what I discovered in research is that the expected contribution on FAFSA woudl be 35% of the 529 as an asset if they own it, but only 5% or so if I own it. But, I think their earned income is so low and this woudl be their only asset woudl not impact grant size very much when I ran it through a calculator

In your case the distinction isn't so much who (parent or child) owns the 529 account as it is the fact that after getting married your daughters will be considered independent for FAFSA reporting purposes. When a student is not independent for FAFSA reporting purposes and parent financial information is required, a student-owned FAFSA is reported as a parent asset.