Financial Aid and UGMA accounts
Hi Terry…I have three kids (ages 14, 13 and going to be 10) and each has a TD Ameritrade account. I am the “custodian” for each account. The account type for each is noted as “UGMA/UTMA.” Is this going to hurt them when I apply for college financial aid? If yes, what do I need to do (take their names off of each account?). Also, will it hurt them to have a savings account?
Thanks for all that your do!
Terry Says
Ugh, are you just finding out that UTMA/UGMA accounts weigh 7x more heavily against you in the financial aid formula for college?
There are so many complications in the answer to this question — taxes, capital gains, the “kiddie” tax –as well as the aid impact. All are covered completely in this article from SavingforCollege.com. I urge you to read it all the way to the end.
https://www.savingforcollege.com/article/should-you-convert-an-ugma-or-utma-to-a-529-plan-or-not
One thing I can say for sure. Do NOT save any more in the UGMA accounts. Open a 529 plan for new contributions, and if you live in a state like Illinois, you may also get a tax deduction.
