A custodial 529 plan account is similar to a regular 529 plan account, but with the student as both account owner and beneficiary. When the student is a minor, the account must be managed by a custodian (typically a parent or grandparent) until the student reaches the age of majority.
Is 529 or custodial account better?
Even before the age of majority, the funding is still part of the child’s estate, not the parents’. Because a custodial account transfers assets to the child’s estate, these accounts often have a greater effect on financial aid eligibility than a 529 plan, which leaves the money in the parents’ estate.
What is an UTMA / UGMA 529 savings plan?
An UTMA/UGMA 529 plan is a custodial 529 college savings plan account funded with money from an existing Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) account. It …
Can you transfer funds from a custodial account to a 529 plan?
Can I transfer funds from my custodial accounts to a 529 (and vice versa)? You can move money from a custodial account, such as a UGMA (Uniform Gifts to Minors Act) or a UTMA (Uniform Transfers to Minors Act), to a 529 plan. But you can’t do the reverse — transfer or convert from a 529 to a custodial account — without adverse tax consequences.
Can a 529 be held in a parent’s name?
In typical financial-aid formulas, money that’s held in a child’s name, as with an UTMA or UGMA, is more likely to reduce your aid eligibility than money held in a parent’s name, as is the case for 529 accounts. And even though a custodial 529 technically belongs to the child, it is considered a parental asset for financial aid purposes. 4 1
What can a parent do with UTMA money?
It’s a gift to the child under the Unified Transfer to Minors Act, or UTMA. Parents (or other adult subscribers) act as custodians until the child is an adult. They can spend money from the account for the child’s benefit—on music lessons or summer camp, for instance.
