Ask Terry Questions College savings in child’s name

College savings in child’s name

By Terry Savage on December 08, 2013 | College Savings / Student Loans

Hi Terry,
My son will be going to collage next year. He has some money in savings & a little more in a stocks.
My question is what to do with his stocks in regards to financial aid? Is it better to move them into my name so they don’t show up on his application?
Thanks, Larry

Terry Says:  Well, you’ve run up against an issue that I’ve warned about for years.  Money in a child’s name (in a custodial account,, typically) counts 7X more heavily against you in the financial aid formula than parental assets.  So the first question you must ask is whether you can reasonably expect to qualify for ANY financial aid.  Ask your son’s college counselor where you fit in the formula or go to where you can use their calculators to see your EFC (expected family contribution) based on your income/assets.

If you do have significant assets in your child’s name, and if you are potentially going to get financial aid, you need to do something before year-end, before you have to fill out the financial aid forms in the coming year (assuming your child is a junior in high school now).  You can’t simply transfer the stock to your name.  He would have to sell them, and they would be reported on your tax return (or his, if he is filing_ — so check with your accountant to see what works best, and that also depends on the amount of gain involved.  Either way, this should be done in the year preceding the year for which you must disclose assets on the FAFSA form.  So get some individual advice right now!



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