Anyone have experience with FBO checks?

[EricLaurie]

I recently withdrew money from DD18 college fund to pay for her tuition. I put the tuition on my credit card (no fees and I got airline miles) and withdrew the money and had the check sent to me. She's a freshman and I did this first semester - no problem. I know I had to be able to prove that it goes to her tuition - all is good there.

This time I made the deposit at an ATM and they denied it saying they couldn't deposit it to my account because of the way it was made out. It was payable to me with an FBO line to my daughter below it. They then mailed an endorsed check back to me (talk about a safety issue). I took it back to the bank today and spoke to a manager. She refused to accept the check at all. In talking with her, she would only accept my sizable deposit unless it went into an account with both my name and my daughter's name on it. I have access to her checking account, so I deposited it there and will transfer it out.

Does anyone have experience with this? I tried googling this and didn't really get an answer. I'm trying to figure out if this is common. I deposited the check for first semester no problem - bank manager told me I probably just got lucky. Does a check payable to me with an FBO line like that need to go into a joint account?

 

[tvguy]

I am assuming the money came from a 529. There are legal restrictions on how funds can be withdrawn from 529 plans. That is what triggered the FBO (for benefit of) line. Most folks would likely just have the check made out to the College, FBO the student's name to avoid the situation you encountered. It is common, it is something you agreed to when you opened the 529 plan.
If it is NOT a 529 account, then I have idea.
I dealt with this when my wife and I rolled our 401k money out into IRA's. Those too have the FBO requirement. The checks were made out to our Brokerage, FBO us. Those checks were sizable......in my wife's case equal to 15% of her pay for 40 years plus growth from the investments the money had been put in.

 

[LuvOrlando]

Those accounts are a real nuisance, the setup works much better if you have them pay the school directly, everything else can very easily trip you up.

Caution, be aware that if you overpay they will do everything in their power to get the difference it to your kid to squander which was very unsettling to me. I'd suggest talking to your child about random money being a loan, weirdos at the school financial offices are acting like it's free Twilight zone experience IMO. I made sure my children did not setup any automatic financial relationship with the school, everything was via paper so when we got money back in a check I could force them to return it to the loan by not cashing the checks. This is the way

 

[MrsPete]

So the problem is that the college money is in your child's name ... and you're trying to deposit it into your account. Yeah, I see why the bank has a problem with that, even though you're doing nothing wrong here.

I think the answer is to coordinate with your daughter. Explain to her that you need her to jump through a few hoops and sign some checks. Since you're paying her college tuition, I don't see why she'd have a problem with that.

Oh, and I'd totally keep paying the tuition with the credit card to get those rewards points. We could've taken a cruise with the credit card rewards points we had after paying for college.

 

[amylevan]

I can’t really answer the FBO question but I can tell you that my understanding is that in the future the best way to reimburse yourself is to have the check made out to your daughter. Have her cash the check and then transfer you the money. That would avoid future bank issues and makes it less likely that the IRS is going to question the withdrawals.

 

[sam_gordon]

When we set up 529 accounts for our kids, the accounts had the kids name and DWs. We have had no problem getting money out of the 529 and putting it in one of our account. We generally withdraw just a little more than the bill from the college each semester.

 

[SueInBoston]

If you need to do this again maybe setting up direct deposit? I have money from my son's 529 go directly into my checking account and I write a check for the tuition. (did same for my daughter's 529 account)

 

[DLgal]

Why aren't you just electronically transferring this money to your checking account? What type of account is the college fund in?

If it's a 529, YOU are the account owner and your daughter is a beneficiary. The money will come to you and at tax time, you need to match the withdrawal amount to the Tuition statement for the year, and indicate that the funds were used for your child.

I have withdrawn money from my husband's 529 but since I own the 529 accounts, it was paid to me. I just did an electronic transfer rather than dealing with a check deposit. Hasn't been an issue for the last 2 years. We don't even have a physical bank branch. We do everything electronically.

 

[tvguy]

Oh, and I'd totally keep paying the tuition with the credit card to get those rewards points. We could've taken a cruise with the credit card rewards points we had after paying for college.

The rewards points are why my daughter's University wouldn't take credit cards, because, of course, THEY pay the fees to cover your rewards. There is no free money. That was a public college and was among a group of colleges lobbying the credit card companies to stop charging merchant fees for college tuition.
My son't private college had no issue with credit cards.

 

[DLgal]

The rewards points are why my daughter's University wouldn't take credit cards, because, of course, THEY pay the fees to cover your rewards. There is no free money. That was a public college and was among a group of colleges lobbying the credit card companies to stop charging merchant fees for college tuition.
My son't private college had no issue with credit cards.

We just paid a $2500 (refundable) admission deposit to UCLA for an Executive MBA program via credit card. They take credit cards for all tuition and fees, and for this program it's $88,245 per semester. Luckily DH will get to go for free.

 

[sam_gordon]

We just paid a $2500 (refundable) admission deposit to UCLA for an Executive MBA program via credit card. They take credit cards for all tuition and fees, and for this program it's $88,245 per semester. Luckily DH will get to go for free.

That seemed really extreme to me. I did a quick google. Is this different?

The tuition and fee cost of the UCLA Executive MBA program is $83,996 for the first year, totaling around $167,992 for the entirety of the program. Executive MBA fees cover registration, tuition, books and software supplies, meals, parking, and off-campus residential costs.

Source

I mean $42k/semester still seems high, but not nearly as much as $88k/semester.

 

[EricLaurie]

When we set up 529 accounts for our kids, the accounts had the kids name and DWs. We have had no problem getting money out of the 529 and putting it in one of our account. We generally withdraw just a little more than the bill from the college each semester.

You are correct- it’s a 529 plan. I had no problem the first time. That’s what made this so surprising.

It did work out. I put the money in a joint account and transferred it out. The check was payable to me. I’m the one that has to file the taxes on it and prove how it was used. Not sure why the bank cared so much.

 

[EricLaurie]

If you need to do this again maybe setting up direct deposit? I have money from my son's 529 go directly into my checking account and I write a check for the tuition. (did same for my daughter's 529 account)

Agree on this one. I’m going to set this up next time.

 

[EricLaurie]

So the problem is that the college money is in your child's name ... and you're trying to deposit it into your account. Yeah, I see why the bank has a problem with that, even though you're doing nothing wrong here.

I think the answer is to coordinate with your daughter. Explain to her that you need her to jump through a few hoops and sign some checks. Since you're paying her college tuition, I don't see why she'd have a problem with that.

Oh, and I'd totally keep paying the tuition with the credit card to get those rewards points. We could've taken a cruise with the credit card rewards points we had after paying for college.

Definitely hoping for enough airline miles to go somewhere really good when kids are done with school

 

[barkley]

The rewards points are why my daughter's University wouldn't take credit cards, because, of course, THEY pay the fees to cover your rewards. There is no free money. That was a public college and was among a group of colleges lobbying the credit card companies to stop charging merchant fees for college tuition.
My son't private college had no issue with credit cards.

yet the same public (and private) colleges had NO problems accepting the upwards of millions of dollars per year these same credit card companies paid to set up tables on their campuses to entice young adults. with changes in the law there have been restrictions on that type of marketing but it doesn't stop colleges from selling the rights to put their campus logos and mascots on credit cards marketed to students and alumni guaranteeing a payment or 'charitable donation' every time that card is used. i have no sympathy for the colleges who were and to a great extent still are in bed with credit card companies.

 

[tvguy]

That seemed really extreme to me. I did a quick google. Is this different?

Source

I mean $42k/semester still seems high, but not nearly as much as $88k/semester.

Well, that would explain the ridiculous student debt some people have. My daughter is looking at going back to school for her MBA. She is looking at a program at a German University that costs $24,000 in total, INCLUDING housing. She just needs to pay to get there, and for her food. Not sure how she found this program, but it clearly is geared at International students since the classes are all taught in English.

 

[DLgal]

That seemed really extreme to me. I did a quick google. Is this different?

Source

I mean $42k/semester still seems high, but not nearly as much as $88k/semester.

Sorry, the way they divide it up for payment is "sessions." There are 2 sessions. But they still have 2 semesters per session. It's confusing.

 

[DLgal]

Well, that would explain the ridiculous student debt some people have. My daughter is looking at going back to school for her MBA. She is looking at a program at a German University that costs $24,000 in total, INCLUDING housing. She just needs to pay to get there, and for her food. Not sure how she found this program, but it clearly is geared at International students since the classes are all taught in English.

99% of the benefit of an MBA program is the alumni and corporate network you get access to by attending. Regional employers latch onto Univeristies with prestigious MBA programs and offer fellowships and internships that can land you employment afterwards. In addition, most jobs are gotten via networking these days. You need to know people to get jobs. If you are an alumni of a good program, you will more easily find connections from other alumni.

MBA programs are expensive, but they pay off with much higher lifetime salaries. But a program at a German university is likely to have very little real world benefit, especially if your daughter won't be staying in Germany to work. This is one degree that is only worth as much as the school's reputation is.

 

[tvguy]

99% of the benefit of an MBA program is the alumni and corporate network you get access to by attending. Regional employers latch onto Univeristies with prestigious MBA programs and offer fellowships and internships that can land you employment afterwards. In addition, most jobs are gotten via networking these days. You need to know people to get jobs. If you are an alumni of a good program, you will more easily find connections from other alumni.

MBA programs are expensive, but they pay off with much higher lifetime salaries. But a program at a German university is likely to have very little real world benefit, especially if your daughter won't be staying in Germany to work. This is one degree that is only worth as much as the school's reputation is.

MBA's are something I know nothing about. With other degrees I have found the University giving the degree didn't guarantee a good employee.

 

[DLgal]

MBA's are something I know nothing about. With other degrees I have found the University giving the degree didn't guarantee a good employee.

MBAs are different in that regard. An MBA from a no name school has close to zero credibility and won't help at all in a job search. It would honestly be a waste of $24,000 for your daughter to attend this program unless she is just doing it for fun or for the experience of studying abroad.

My husband just secured a $20,000 pay bump at his new job (compared to the other 2 direct hires who came on board with him) simply because he is an MBA CANDIDATE at UCLA Anderson School of Business. The company he works for very much values continued education and has several MBAs from the UC system in their ranks. They cited his education credentials as justification for agreeing to the higher pay that he countered with at the initial offer. That degree will make him more valuable to the company long term, and that is what they are looking for.