12 Oct Can I use college savings for college visits?

Q. I’ve been trying to spend down my son’s UTMA before we will out the FAFSA next year. Can I use the money for all the college visits we’ve gone on, for hotels, etc.?

A. You’re correct. All of your son’s assets will have some kind of impact on his eventual financial aid award.

Per the Uniform Transfer to Minors Act, “A custodian may deliver or pay to the minor or expend for the minor’s benefit so much of the custodial property as the custodian considers advisable for the use and benefit of the minor.”

“Using that general rule, college visit costs, hotels, etc. should be fine,” said Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton. “Anything for personal use — the adult, not the child — is not allowed.”

For New Jersey, the age of majority is 21, Lynch said. That’s when the child takes full ownership of the account.

Lynch said the FAFSA has a base year that looks at parents’ tax returns.

“If the child were to start college in September 2016 — the award year — then Jan. 1, 2015 to Dec. 31, 2015 is the base year,” Lynch said. “Aid will be determined on the base year.”

Lynch said FAFSA does not have a look back, but that doesn’t mean your college won’t see action you took in the year prior. For example, he said, if you have an interest-earning asset in 2014 that you move to shelter in hopes of getting a larger award, a thorough financial aid officer will see the interest on the tax return and notice the asset is no longer listed.

“This will lead to a ‘verification’ procedure by the school, which happens often enough to be taken seriously,” Lynch said. “This is where they will discover the moved asset.”

The safest time frame to avoid this process is to start the planning prior to the child’s senior year, and preferably before junior year, Lynch said.

Just remember that if your circumstances change, or if there’s a more favorable explanation to the movement of your assets, you can communicate and explain to the financial aid office and ask for an appeal or further review.

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This story was first posted in October 2015.