Reply to ISO advice on whether to fill out the FAFSA form - 529 in grandparent's name FBO the grandchildren

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[quote=Anonymous]I welcome advice on the situation below.

1. We have 3 kids (ages 12-19).

2. When our kids were born, my mom was very generous to set up a 529 for each of the 3 kids.  She told us about each 529 when she set it up, and seemed proud/happy to be doing this for her grandchildren.  (These are her only grandchildren.)  Each 529 is in her name and for the benefit of each of the 3 kids.  I do not know the exact amounts of these (as my mom doesn't share the info, and I do not ask), but I believe each account has at least $225,000.  (She "super-funded" each account at the time when each of our kids was born, and the stock market has done well.)  My DH and I have no access to these accounts.

3. For our oldest (DS1)(now a college freshman), we did not complete the FAFSA form.  Our DS is a mediocre student (3.25 and 28 ACT), and so we hoped that it might help him that he did not fill out the FAFSA form.  (He did get into quite a few middle-tier schools.  A few of the schools would have required that he start in the spring, and so he barely got in but did.  (He did not get into - nor did he apply to - the U of Maryland.)  A few of the schools even offered him a little bit of merit aid even though we did not fill out the FAFSA form.

4. When it came time to write the first tuition check for my DS, I talked to my mom and asked if we could start to tap into the 529.  (I told her that the total price for freshman year would be $50,000.)  She said sure, and that she would cover tuition/room/board.  She grumbled a bit about the price, and hinted that perhaps she might need the money in the 529 for her own living expenses, down the road.  This was kind of a shock and was the first time I had heard any notion that she might need the money for her future expenses.  Then she assured us that she'd cover tuition/room/board for a college, but that our younger 2 kids should also (of course) try for merit scholarships.

5.  Our middle child (DD) is now in 11th grade.  She is a better student than our DS (mostly A's, lots of APs, and a 1350 on the SAT).  Unlike with our son, we're not worried about her getting into a college.  We think she'll be a contender for some good colleges.  But we wonder if if would help her if we avoided filling out the FAFSA.

6. Despite my mom's wobbling, I do think that she'll end up paying tuition/room/board.  At the same time, I want to minimize the burden on her.  She lives a UMC (or slightly lower) lifestyle, and has been very savvy with her investments.

7. I want to mitigate the burden on my mom, and figure I could do that by completing the FAFSA.  My DH and I were both federal employees for a long time, but our HHI recently got to $450K.  (Granted, my DH is in a commission (not salaried) position -- he is in a field where the compensation is totally dependent on the business he brings in.)  We have good amounts in our 401(k)(TSP) accounts.  However, we do NOT have any taxable accounts or other assets.  We literally only have our 401(k)s and home equity.

8. Because the 529s are in my mom's name FBO my kids, I'm curious if I must disclose that on the FAFSA?  My DH and I definitely do not control that money.  We are dependent on my mom to take the money out (which she has done for my DS so far this year).

9. If we do need to disclose the 529s that my mom has set up, then I figure that I will not do the FAFSA for my DD.  However, if we do not need to disclose the 529s that my mom has set up, do you think we should fill out the FAFSA?  We are trying to build up more of a cushion of savings (in a taxable account).  But at the moment, we only have our 401(ks)/TSP and our home equity.  Even with our decent HHI, I would guess we might qualify for some discount in tuition?

Thanks and I welcome any thoughts on this situation.[/quote]

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