529 Plan and UGMA information?

[punkin]

DD14 has an UGMA account with about $7K in it. Is there any way to transfer this money into a 529?

 

[sandy6879]

you absolutely can if you are the custodian on the UGMA. Other people may differ on this, but I highly suggest speaking with a financial advisor for a 529 - many branch managers at banks now are licensed to sell these products and can assist you in opening a plan.

 

[storybookstory]

DD14 has an UGMA account with about $7K in it. Is there any way to transfer this money into a 529?

Ironically, I just looked into the same thing two days ago. DD and DS each have a UGMA and I emailed them to ask if I can transfer it to a 529 account. They said yes, but I THINK there is a caveat. I would bet that the 529 account would need to be in my childs name, not my name. Since UGMAs are custodial accounts (you are acting in your child's behalf until they turn 18) then I doubt the money can be turned over to a 529 account in my name with my child as beneficiary. The difference in this will come when my child applies for financial aid. Money in my childs name counts more heavily (that is, they are expected to use a higher percentage of it for college) than money that is in my name. So, while this is a great alternative for the money you have in there now it might not be the 529 you want to continue to deposit into.

This is how I understand it but the finanical gurus on the board may correct me.

 

[punkin]

Ironically, I just looked into the same thing two days ago. DD and DS each have a UGMA and I emailed them to ask if I can transfer it to a 529 account. They said yes, but I THINK there is a caveat. I would bet that the 529 account would need to be in my childs name, not my name. Since UGMAs are custodial accounts (you are acting in your child's behalf until they turn 18) then I doubt the money can be turned over to a 529 account in my name with my child as beneficiary. The difference in this will come when my child applies for financial aid. Money in my childs name counts more heavily (that is, they are expected to use a higher percentage of it for college) than money that is in my name. So, while this is a great alternative for the money you have in there now it might not be the 529 you want to continue to deposit into.

This is how I understand it but the finanical gurus on the board may correct me.

OK, but since I am the custodian, can I just take the money out and then redeposit it into a 529 in my name with my DD as beneficiary?

I know we are going to have problems with the financial aid and that is precisely why I want to do this. When we started this account there were no 529s.

 

[poohj80]

I have a related question for those of you wondering about transfering from the UGMA to the 529.

Our financial advisor is really pushing the UGMA over the 529 since it has more flexibility. What are the benefits that are making you consider transfering funds out of the UGMA and into the 529?

 

[storybookstory]

OK, but since I am the custodian, can I just take the money out and then redeposit it into a 529 in my name with my DD as beneficiary?

I know we are going to have problems with the financial aid and that is precisely why I want to do this. When we started this account there were no 529s.

I found this on the web at www.401kid.com
http://www.401kid.com/faq-529plans.html#26


26) Q. Can I move my child's UGMA/UTMA assets into a 529 account?

A. Yes. Assets in a UGMA/UTMA can be moved into a 529 account. You would have to redeem your child's assets a UGMA/UTMA account and then move it into what's known as a "custodial 529 account". The rules that apply to UGMA/UTMAs would also apply to the custodial 529 accounts. If the UGMA/UTMAs is a taxable account, any earnings on redemptions will be taxable. The amount of actual taxes paid will depend on the age of the child.

If your child's age is less than 18 then the first $800 of earnings (growth)is tax-free. Earnings between $800 to $1,600 is taxed at the child's tax rate, and earnings above $1600 is taxed at the parent's tax rate. For kids over 18 years of age, all earnings are taxed at the child's rate.

Redemption of assets would require that you contact the manager of the UGMA/UTMA. The UGMA/UTMA manager will issue a check to you. You would then be required to move the money into a custodial 529 account.

Not sure the difference between the custodial 529 and a regular 529.

Also found
http://www.savingforcollege.com/top-tip/top-tip.php?top_tip_id=4

 

[storybookstory]

OK, but since I am the custodian, can I just take the money out and then redeposit it into a 529 in my name with my DD as beneficiary?

I know we are going to have problems with the financial aid and that is precisely why I want to do this. When we started this account there were no 529s.

From:
Also found
http://www.savingforcollege.com/top-...p?top_tip_id=4

Moving UGMA/UTMA money into a 529
by Joe Hurley, founder, Savingforcollege.com
Tuesday, February 14th 2006

If you are concerned with maximizing your child’s financial aid eligibility, consider moving her UGMA/UTMA money into a 529 savings plan or prepaid tuition plan. You’ll benefit from the recent changes made to the federal aid formula under the Deficit Reduction Act of 2005 (signed into law by President Bush on February 8, 2006).

Beginning July 1, 2006, UGMA/UTMA assets held within a 529 savings plan will no longer be included with other student-owned assets in the formula for determining a family’s “expected contribution” towards college costs. What used to count against aid eligibility at the rate of 35 percent will now be assessed at no more than 5.64 percent of value. The picture brightens even more considerably for families using a state-sponsored prepaid tuition plan or the private-college Independent 529 Plan. Instead of causing a dollar-for-dollar reduction in federal aid eligibility, prepaid plans will now share the same treatment as 529 savings plans.

 

[momsully]

This is a great site that talks alot about 529 plans and shows you how they work in various states. http://www.savingforcollege.com/

 

[storybookstory]

I have a related question for those of you wondering about transfering from the UGMA to the 529.

Our financial advisor is really pushing the UGMA over the 529 since it has more flexibility. What are the benefits that are making you consider transfering funds out of the UGMA and into the 529?

Wow, really? With the UGMA the child gets full control over the money at 18. That's it. They can go buy a Corvette and you can't do anything about it. With a 529 it can only be used for education purposes for your child or some other beneficiary including yourself.

For financial aid reasons the 529 is better for the reasons in the post above.

 

[poohj80]

Wow, really? With the UGMA the child gets full control over the money at 18. That's it. They can go buy a Corvette and you can't do anything about it.

We knew about this issue but also wonder if our DD will even know she gets this control if we don't tell her. We plan to call it a college account and leave it at that. Eventually she may ask for more info. I guess if we are really worried about it, we could transfer the money to a 529 when she's 17 right?

 

[punkin]

Thank you guys soooo much. That's exactly the info I was looking for.