FAFSA 529 ownership dilemma - grandparent vs student accounts for maximum aid eligibility?

You've got the basics right - student-owned assets (including 529s) are counted at 20% for FAFSA purposes, while grandparent-owned 529s aren't reported on the FAFSA at all under the new FAFSA simplification rules. This is a significant change from the old system. First, check whether the accounts are actually in your children's names or if your FIL is the owner with your children as beneficiaries. This distinction matters enormously. If your FIL is already the owner, you don't need to change anything. If your children are the actual account owners, then yes, moving ownership to your FIL would be beneficial for FAFSA purposes. Most 529 plans allow ownership changes, but the specific process varies by state. Contact your plan administrator directly to ask about their ownership transfer process. Regarding gift taxes - there are no gift tax implications when your FIL withdraws from the accounts to pay for qualified education expenses. The annual gift tax exclusion ($18,000 in 2024) only applies when money is being contributed to the accounts, not when it's withdrawn for proper educational purposes.

omg i went through literally this EXACT situation last year with my dad's 529s for my kids!!! its SO confusing!!! just make sure ur 100% clear about who OWNS vs who BENEFITS from the accounts, those mean totally different things with 529s

Just to add some additional context to what others have said - this is one of the significant improvements with the new 2024-2025 FAFSA Simplification Act changes. Under the old rules, distributions from grandparent-owned 529 plans would count as untaxed student income on the following year's FAFSA (assessed at 50%!). Now, with those distributions no longer being reported on the FAFSA, grandparent-owned 529 plans have become an extremely strategic asset for financial aid planning. The ownership question becomes critically important. If you discover the accounts truly are student-owned, I would strongly recommend looking into ownership transfer before your first FAFSA submission. Each state's 529 plan handles ownership transfers differently - some allow it with simple paperwork, others might consider it a new contribution (with potential gift tax implications). For maximum aid eligibility, ideally your household financial structure would be: - Parent-owned assets minimized when possible (assessed at 5-5.64%) - Student-owned assets minimized (assessed at 20%) - Grandparent-owned assets maximized (not assessed at all) Your financial aid planning should start at least 2 years before your children begin college for optimal results.

The financial aid system is RIGGED against middle class families!!! We make too much to qualify for good aid but not enough to actually pay these insane college prices. My sister's kid had $20k in a 529 and it completely DESTROYED their aid package - they would have been better off with nothing saved at all!!! The whole system PUNISHES responsible families who try to save while REWARDING those who don't bother. It's MADDENING.

Friendly heads up that you might want to contact Federal Student Aid directly to discuss your specific situation. I was in a similar boat last year with my niece's 529 accounts and spent WEEKS trying to get someone on the phone. I eventually discovered Claimyr (claimyr.com) which helped me get through to an actual human at FSA in about 15 minutes instead of waiting on hold for hours or getting disconnected. They have a video showing how it works: https://youtu.be/TbC8dZQWYNQ The FSA agent I spoke with was actually really helpful and walked me through all the specific implications of 529 ownership changes given our unique situation. Much better than trying to piece together info from different websites!

kinda off topic but has anyone had any luck with scholarship applications? my daughter has decent grades (3.6 GPA) but isnt like exceptional at sports or anything... we need to find money somewhere lol

Good news! Based on your update that your FIL is actually the account owner (with your children as beneficiaries), you're already in the optimal position for FAFSA purposes. As for your question about withdrawals - yes, as the account owner, your FIL typically needs to request the withdrawals himself. However, many 529 plans offer solutions for this: 1. Some plans allow the owner to designate a "limited power of attorney" specifically for making withdrawal requests 2. He could set up online access and share the login credentials with you (though this isn't officially recommended) 3. Many plans allow setting up recurring or scheduled payments directly to institutions 4. Some plans permit the owner to add an authorized user who can request withdrawals Call your specific 529 plan administrator and ask about their options for handling withdrawals when the owner isn't readily available. Each state's plan has different policies on this. Also, remember that under the new FAFSA rules, the timing of withdrawals no longer matters for aid purposes (previously, grandparent 529 withdrawals would count as student income in the following year's FAFSA).

i got confused with all the fafsa changes...does anyone know when we're suposed to file for seniors graduating in 2025? isnt it like october or somethng

Thank you all for the incredible advice! After making several calls today, I confirmed that FIL is indeed the owner of the 529 accounts (phew!). I also learned that our specific state's 529 plan allows for a limited proxy authorization form that will let us request withdrawals without bothering him each time. I'm now shifting focus to other aspects of FAFSA optimization - timing any asset adjustments, understanding how our home equity factors in, and helping the kids target schools where they might qualify for merit scholarships too. This community has been SO helpful - I was seriously losing sleep over this 529 ownership issue!

This is such a great example of why it's worth double-checking all the details before panicking! I'm so glad you called and found out your FIL is already the owner - that's honestly the best-case scenario for FAFSA purposes. Since you mentioned you're now focusing on other FAFSA optimization strategies, here are a few things that helped us when my daughter was applying: 1. If you have any flexibility with retirement contributions (401k, IRA), maxing those out in the base year can help reduce your adjusted gross income 2. Consider timing any major purchases or home improvements before filing - reducing cash on hand can sometimes help with the asset assessment 3. Look into whether your state has any additional aid programs that might have different filing deadlines or requirements Also, don't overlook the CSS Profile if any of your kids' target schools require it - the strategies can be quite different from FAFSA optimization. You're being so proactive with this planning while they're still juniors - that's going to make such a difference!