If a student is applying to college and requesting student aid, but has a substantial amount of money in a UTMA account, can that negatively affect their chances to receive financial aid? If so, is there anything that can be done to eliminate this negative effect, such as keeping the UTMA a custodial account until after graduation, or converting it to a retirement account?


Yes, it's considered the students asset, regardless of the custodian aspect.

I don't know how you'd propose to put it in a retirement account, even with the earned income to facilitate this, the limit is $5500/yr.

The larger issue is parental income. That and parental assets. Tough to game that part of the system to get aid. In the end, one should look to scholarships, both merit and non merit based to maximize college support.

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  • Thank you. FA has always been confusing to me. I worked to put myself through college so the idea of considering parental income or assets is hard to wrap my head around, though I understand it happens. As a follow up, my future students are 14 and 15 and our rule is that they must put 20% of their income away 'towards retirement' (it really goes into the UTMA). We do this to help teach them to save more than for the money itself. But from a FA and tax perspective, would it make more sense to setup an actual retirement account for them to contribute to in the new year? – Nicholas Dec 21 '16 at 22:08
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    @Nicholas That might be a good separate question, to be honest. (The answer is "probably yes" if they have legitimate earned income, in my opinion) – Joe Dec 21 '16 at 22:20
  • I'd open the Accounts now, Roth IRAs, and shift as much as $11,000 each to cover both this year and next. You actually have till tax time 2017, but why wait? – JTP - Apologise to Monica Dec 22 '16 at 3:10

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