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[quote=Anonymous]We had a financial advisor*  tell us that when we use our parents funds for our child's college, that we should open our own 529 with a small amount and then each time a bill is due, transfer only that amount of money from the grandparent's 529 to our 529, and then pay it immediately to the school. I don't understand why this is. I know the 529 owned by the grandparent isn't used when calculating the FAFSA expected financial contribution by the student's family. However, I saw that when it's used for tuition, it's counted as student income that they have to report, which affects the FAFSA the following year.  The advice I read online is that it's better to transfer the grandparent's 529 to the parents once the kid is about to start college, so that even though it counts when calculating the FAFSA, it doesn't have as big an impact as counting the grandparent-paid tuition as income.

Is that what I should do? Or should I do the business of transferring from the grandparent's account to mine only what we need for the current bill, and then paying it right away? (This seems a little like money-laundering of some kind...)

*a person who advises people on how to pay for college, not an official financial advisor
and yes, I realize I should go back and ask this advisor to clarify, but I'm not able to reach him. [/quote]

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