What is the name of your state?What is the name of your state? New York
[I posted this on the Tax Law forum, but there have been no responses.]
I have two children who will be in college next year. They each have substantial UTMA accounts. Right now we are doubly penalized because (a) FAFSA "taxes" the kids' assets at a much higher rate than parents', and (b) I claim the kids as tax dependents, so the IRS won't allow me (or the kids) to get Hope or Lifetime tax credits when tuition is paid from their UTMA accounts. (While the kids do file 1040s for the earnings of the UTMA accounts, the annual tax paid is small or zero, so the tax credits won't help THEM.)
Does anyone know if it is legal for the kids to GIFT to me (the parent and custodian) $11K each from their UTMA so that I can use it to pay (a portion of) their tuition AND take advantage of the tax credit(s)?
Does the answer depend upon whether or not the UTMA beneficiary (and prospective donor) is older than or younger than 18?
I don't see this as evasive because (a) the money would be going toward a legitimate use, (b) this doesn't affect the asset distribution for FAFSA.
[I posted this on the Tax Law forum, but there have been no responses.]
I have two children who will be in college next year. They each have substantial UTMA accounts. Right now we are doubly penalized because (a) FAFSA "taxes" the kids' assets at a much higher rate than parents', and (b) I claim the kids as tax dependents, so the IRS won't allow me (or the kids) to get Hope or Lifetime tax credits when tuition is paid from their UTMA accounts. (While the kids do file 1040s for the earnings of the UTMA accounts, the annual tax paid is small or zero, so the tax credits won't help THEM.)
Does anyone know if it is legal for the kids to GIFT to me (the parent and custodian) $11K each from their UTMA so that I can use it to pay (a portion of) their tuition AND take advantage of the tax credit(s)?
Does the answer depend upon whether or not the UTMA beneficiary (and prospective donor) is older than or younger than 18?
I don't see this as evasive because (a) the money would be going toward a legitimate use, (b) this doesn't affect the asset distribution for FAFSA.