Can an UGMA/UTMA account reduce my childs financial aid for college?
It can, but in the same way that any other asset held by your child can. An UGMA/UTMA account is a custodial account established at a financial institution for a minor child and managed by a parent or other designated custodian. It is established under either a state’s Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA). Because an UGMA/UTMA account is held in your child’s name, it is considered your child’s asset. The federal government’s financial aid formula treats your child’s assets differently than your assets. Under the current federal formula, children must contribute 20 percent of their assets to college costs each year before becoming eligible for financial aid, while parents must contribute only 5.6 percent of their assets. For example, $10,000 in your child’s UGMA/UTMA account would result in a $2,000 required contribution from your child. The same $10,000 in your bank account would result in a $560 required contribution from you. As a result of thi
