SS department wants me take money out of a 529 to send to them to send to my daughter?

[liberal_at_heart]

My husband is legally blind. He recevies Social Securtiy Disability. He also receives Social Security Disability for our children. Our daughter is about to turn 18. She is eligible to keep receiving Social Security until she graduates high school which is in June of 2013. We have been using the majority of money we get for her to pay bills, but we do set some aside every month to put in a 529 college savings plan for her. I just received a letter from Social Security saying they think she should start receiving the checks directly which would make sense if she didn't live with but she does live with us and is dependent upon us until she graduates high school, so this makes no sense at all. Secondly, they want us to send them any money we have saved or invested for her so they can send it directly to her. WTF? Do they honestly expect us to take money out of her 529, send it to them, so they can send it to her?

[Lionessa]

1. Legal age is 18 regardless, it's also the age you can require her

to pay for room and board, but that's between you two, not SS. She's 18, she's legally and morally supposed to receive the payments directly.

There is no rule or law that says you have to care for her till graduation, though it is the norm and morally correct also.

So you've got two things both morally correct, and only one legally correct.

Require room and board, which if you put it in writing will help her later as a legitimate credit reference.

[obamanut2012]

5. Require a high school student who is your child to pay room and board?

WTF?

Who the hell would do something like that to their kid in high school?!

[Retrograde]

29. It used to be a lot more common in some circles

especially blue collar ones in the big industrial cities: kid leaves school, gets a job, kicks in something to help with household expenses. I've never heard it asked of someone who was still in school, though.

[obamanut2012]

34. That's different if they weren't still in high school

Although my family never did that to any of us, but to a kid still in HS?

[Jackpine Radical]

35. My mother left her abusive rural farm home at 14 during the Depression

and went to the nearest town, where she got a job as a maid & put herself through high school, and then on to a slightly larger town where she again worked as a maid to put herself through teachers' college (2 years in those days).

[mysuzuki2]

2. Standard procedure

She is a legal adult at age 18 and is entitled to receive the money directly. Any monies you have saved for her are hers and must be turned over to her. In practice SSA will not really care if you do so directly or send it to them to be disbursed to her. Believe me, I have had this same conversation hundreds of times when I worked for SSA. It is the law. If you feel she is unable to manage her own funds for a medical reason, you may apply to remain her payee. It is just the law.

[liberal_at_heart]

6. If I had cash saved up in a savings account I would understand that

But the 529 is earning money. She is going to lose money by having it taken out just to be sent to her so that she can turn right around and put it right back. It just doesn't make any sense to me. That 529 is hers. It is for her college. She is going to get every penny that is in that 529. Why take money out of it just so she can turn right back around and put it back in? They are causing her to lose money and it just doesn't make any sense to me.

[obamanut2012]

12. But it is her money to use as she wants and needs

That is the legal stance.

[Lionessa]

36. Yes, and to take care of herself, ie room and board.

[freshwest]

14. Why do you think she is going to lose money?

Here is some information I found for you:

...Earnings in 529 plans are not subject to federal tax, and in most cases, state tax, so long as you use withdrawals for eligible college expenses, such as tuition and room and board.

However, if you withdraw money from a 529 plan and do not use it on an eligible college expense, you generally will be subject to income tax and an additional 10% federal tax penalty on earnings.

http://www.sec.gov/investor/pubs/intro529.htm

It seems that she will not lose money.

[liberal_at_heart]

17. When has it ever been smart to take money out of an investment

if you don't need the money right away? She's not going to college right now. The money is sitting in the 529 earning money. If we take it out it won't be. She can put it back in but she may be buying in at a higher price. I guess she could get lucky and maybe the stock market will decrease in value in the time we have the money pulled but that is a roll of the dice. I would be perfectly happy changing names on the account, take our name off and her name on so that she is the owner of the account. I don't know if that is possible. For me that would be a much better option. I'm also curious if any of this will affect her eligibility for financial aid. People keep saying it is her money, it is her money. Yes, I understand it is her money. I want her to have her money. My entire goal is to protect and maximize her money for college, and I'm worried that what the Social Security department wants us to do will end up costing her money.

[enlightenment]

28. Might be useful to ring the SSA and speak to someone about

changing the name on the 529 - that way the money is not removed and the legalities are observed. Talk to your investment person at the bank, also - if they don't have the answer, they probably can give you the appropriate "language" to use when you talk to the SSA - the technical stuff. It often helps to have the right terminology when working these things out.

[mysuzuki2]

25. Why don't you just change the account title?

I'm not sure what a 529 is so I don't know if that is possible.

[liberalhistorian]

30. Can you transfer the 529 account to her

and put it in her name? That way you wouldn't have to take anything out and wouldn't lose any money by doing so, but it would satisfy the legal requirements by being in her name. I'm not sure if that can be legally done, but you might want to check that possibility out.

[quaker bill]

8. Could they just title the 529 over to her?

I do not know about 529s, we had a UGTMA, which we set up in her name, and cashed out when she turned 18 and put in a money market in her name. The pre-paid state tuition plan was in her name when we set it up. All of this was with my post-tax earnings, not SSD, which I get is hers at 18.

[liberal_at_heart]

10. that's what someone else suggested. I'm going to look into that.

[Ruby the Liberal]

33. You can remove yourself from the 529, leaving it titled in her name alone

without liquidating the account. Thats how its supposed to be done, but as 529s are governed by individual states, there may be some hoops to jump through.

Call the Customer Service number for your 529 directly (not the bank or financial advisor you bought it from) and ask them what they need to retitle it in her name only. If they can't help, then try the originating source.

[Poll_Blind]

3. Just sayin, but if that were me I'd call them up and record the call.

If the person you speak with pushes something that sounds crazy, talk to your congressman's office about it and include the recording.

This is assuming that you're in a state like I am (Oregon) where you can record calls as long as one party (in this case you) is aware the recording is being made, yadda yadda disclaimer disclaimer.

But I found it invaluable to have recordings of most telephone calls where money/legality/etc is at stake.

PB

[obamanut2012]

4. She is an adult, and she should receive the payments directly

It is HER money. It doesn't matter whether or not she lives with you.

I also do not think you have a choice: the payments WILL be sent directly to her.

The money in a 529 also should be sent to her. It's regs.

[exboyfil]

11. If the 529 is in one of the parent's names

then how can it be considered an asset of the child? You are not obligated to spend the 529 on the designee (that can be changed anytime). You can even spend it on yourself for higher education without tax implications. You can't turn over the 529 without tax implications (cash out and present cash to child paying both the taxes on earnings and the penalty).

The S.S. payments are supposed to be for the care of the child.


Once she is 18 she should get the S.S. checks until she graduates from High School.

[obamanut2012]

13. I don't know why you are arguing with me

I said the same thing.

The 529 is in the parent's name. The money is legally the child's.

[liberal_at_heart]

15. do you have to cash out of it?

Is there no way to just change names, to put it in her name? What about financial aid? 529's are suppose to be a way of saving for college without jeopardizing getting financial aid? If we have to cash out and give her the money she may not be eligible for as much financial aid. This is a mess. I'm going to be really mad if they end up costing her money.

[dkf]

21. That was the child's money going into the 529

The parent can't keep it.

[liberal_at_heart]

22. damn you people don't listen

Never mind.

[dkf]

23. I understand that you saved this for her and had no intention of keeping it.

But the post I am responding to seems to have the idea that it is not the Govt's business because the 529 is in your name. That is what we are taking issue with.

[pinto]

7. Suggest you speak with Soc Sec. Simply signing her 529 over to her legally may satisfy the regs.

(Bypassing the fund routing) And yeah, checks will be sent to her directly once she becomes 18. That's the law. At 18 she is legally an adult. Again, encourage you to speak with Soc Sec directly. Including her in the discussion may be useful, as well. Good luck with clarifying the process.

[liberal_at_heart]

9. I would not have a problem signing over the 529 to her

If that would keep us from having to take money out of it. I just want her money to be safe and keep earning money. I don't want to have to do some silly loop the loop that ends up costing her college savings.

[pinto]

16. Maybe the institution that manages the 529 could help with the mechanics?

[liberal_at_heart]

19. yes, first thing Monday we will be calling the SS department and our financial advisor

[msanthrope]

18. Kindly consult with an attorney. I am an attorney, but not YOUR attorney, and you

should talk to an attorney in your local area to ascertain what you should do.

Your local bar will have a list of attorney's that will give you a half-hour consult at a nominal fee. You should not take legal advice from an Internet Board.

[liberal_at_heart]

20. I agree

We plan on talking to professtionals about this. I planned on talking to SS department and our financial advisor. I hadn't thought about talking to a lawyer but that is a good idea. Thanks.

[jillan]

24. When your child turns 18, they are of legal age. I have a daughter who has multiple disabilities &

when she turned 18, she became of legal age - inspite of the fact that she is totally dependent on me.

I had to apply to become her legal guardian. Now when I sign papers for her, I don't sign them as her mom, I sign them as her legal guardian.

They are adults and it is their money.

I bet you can transfer the money out of her 529 and just have it transferred to another type of savings acct.
Call SS, I bet they will give you some options.

welcome to the world of red tape.

[Sekhmets Daughter]

31. My son is a tax attorney....

Shall I ask him to research this a bit for you? It may take a few days.