Do grandparent-custodial UTMA accounts count as student assets on FAFSA?

utma accounts are always student assets on fafsa no matter whos the custodian. if the student is the benificiary it counts toward their assets which get assessed at like 20% rate

The previous comment is correct, but let me give you more detail. UTMA/UGMA accounts are legally the property of the minor beneficiary once created, even though a custodian manages them. For FAFSA purposes, these accounts are ALWAYS considered the student's asset, regardless of who the custodian is (grandmother in your case). Student assets are assessed at 20% in the SAI calculation, meaning for every $1,000 in the account, your SAI increases by about $200, potentially reducing aid eligibility. Parent assets, in contrast, are assessed at a maximum of 5.64%. One thing to note: the 2025-2026 FAFSA simplified the asset reporting, so make sure you're including these in the correct section when you file.

When my son was applying, we went thru this EXACT same thing!!! His great aunt had set up accounts and we had NO IDEA they would hurt his aid so much!! We ended up spending down the accounts on qualified educational expenses BEFORE filing FAFSA. Used them for his laptop, dorm supplies, books for first semester, etc. That way the money still went toward education but wasn't counted as an asset on FAFSA!!!!

Financial aid advisor here. Yes, UTMA/UGMA accounts count as student assets at the 20% assessment rate on FAFSA regardless of who the custodian is. One important thing to know: if your children are a few years from college, you might consider spending these funds down appropriately or potentially converting them to a 529 plan (though there are tax implications to consider with conversion). For the 2025-2026 FAFSA specifically, report these account balances as of the date you submit the application. The new streamlined FAFSA still asks about these accounts but in a more straightforward way than previous versions.

I spent HOURS trying to get through to someone at Federal Student Aid to ask this exact question last year. Kept getting disconnected or waiting forever. Finally tried Claimyr (claimyr.com) to get through to an agent. They have this video showing how it works: https://youtu.be/TbC8dZQWYNQ The FSA agent confirmed that UTMA accounts are student assets regardless of custodian. They also told me that if the custodian hasn't yet transferred control to the student at the age of majority (18 or 21 depending on your state), it's still reported as a student asset on FAFSA.

DONT LISTEN TO ANYONE SAYING TO SPEND THE MONEY!!! Thats not even legal maybe!!! If grandma is still custodian she has to approve any withdrawals and they have to be for benefit of the child!!! My brother got in huge trouble for taking money out of my nieces UTMA without proper documentation!!! Talk to a financial advisor before doing anything rash!!

My daughter had a similar account from her grandfather. When she turned 18, the account automatically transferred to her control (that's how UTMAs work). She used some of it for a car for college and some for first-year expenses. I was SO MAD because nobody told us it would count against her financial aid!!! She got almost nothing in grants because of that stupid account. The system makes no sense - money that was MEANT to help with college actually PREVENTED her from getting aid.

Thank you all for the helpful information! I spoke with my daughter's grandmother, and she's going to help us use some of the funds for a laptop and other college essentials before we submit the FAFSA. I really appreciate everyone sharing their experiences and knowledge - this was exactly what I needed to figure out our next steps.

Great to see you found a solution! Just wanted to add one more tip for anyone else reading this thread - if you have younger kids with UTMA accounts, consider having the custodian use the funds for educational expenses in the years BEFORE filing FAFSA too. Things like educational camps, tutoring, test prep courses, or even a computer for schoolwork can be legitimate uses of UTMA funds. This way you can reduce the balance over time rather than scrambling right before college applications. My financial planner helped us map out a spending strategy over several years for my son's account, and it made a huge difference in his aid eligibility.

This is such valuable information! I'm in a similar situation with my son who's a sophomore in high school - his great-grandfather set up a UTMA account that now has about $8,000 in it. Reading through all these responses, I'm realizing I need to start planning NOW rather than waiting until his senior year. The idea of spreading out educational expenses over multiple years is brilliant. I think I'll talk to the custodian about using some funds for SAT prep, a better laptop for his coursework, and maybe some dual enrollment courses. Thanks everyone for sharing your experiences - this thread is going to save us from making the same mistakes!

As someone who works in financial aid administration, I want to emphasize a few key points that have been touched on but are worth repeating clearly: 1) UTMA/UGMA accounts are ALWAYS student assets on FAFSA, regardless of who the custodian is - this is federal law, not negotiable. 2) The 20% assessment rate means $14,300 would increase your SAI by approximately $2,860, which could significantly impact aid eligibility. 3) Spending down these accounts on legitimate educational expenses BEFORE filing FAFSA is completely legal and ethical when done properly through the custodian. 4) For the 2025-2026 FAFSA, report the account balance as of the day you submit your application - so timing matters if you're planning to spend some funds first. One additional strategy to consider: if your daughter has any educational expenses this spring (books for dual enrollment, computer equipment, etc.), those could be paid from the UTMA account now to reduce the reportable balance. Just make sure grandmother approves all expenditures since she's still the custodian. Good luck navigating this - it's a common situation that catches many families off guard!