"A grandparent-owned Sec. 529 plan can be a valuable tool for funding the college education of a grandchild. Waiting until the right time to make distributions can allow families to ensure a grandparent-owned plan will not affect financial aid calculations." or plans owned by aunts, uncles, etc....
with a bit of astute maneuvering, such plans can be put to use without jeopardizing financial aid. "Having grandparents wait to notify their 529 plan to send money to the school until after the student is out of the base income years for the FAFSA can keep such distributions from impacting financial aid."
"Although grandparent 529 assets are not listed on FAFSA, qualified distributions from those accounts are counted as income on the subsequent year’s FAFSA — and assessed up to 50% — for the student who is the account beneficiary. Thus, if grandma has $10,000 distributed from her 529 plan to pay some college expenses for her grandson in 2019, the payment would be reported on the FAFSA he fills out in 2020. The result: grandson’s financial aid award could be reduced by $5,000.
The solution is to handle grandparent 529 distributions so they don’t show up on a FAFSA that impacts financial aid," according to Donald Jay Korn.
If a grandparent owned 529 distributed $10,000 per year for high school tuition, what, if any, would be the effect on college financial aid, i.e. FAFSA?
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