No. 1 - Can you regain control of UTMA funds by putting them in a 529?

http://www.savingforcollege.com/articles/no-1---can-you-regain-control-of-utma-funds-by-putting-them-in-a-529

"My son's grandparents have put a lot of money into a UTMA custodial account for him. He is now 15, and I really don't want him to think he can get his hands on the money when he turns 18. Since I'm the custodian I figure that I can transfer his UTMA account to a 529 plan and name him as account beneficiary. That way I control the money when he turns 18, not him. Any problems with this plan?" - Jan, Ohio I get that question a lot. We like to think that our children will be responsible enough to handle money that comes their way when they reach age 18 or 21. But we also hear about those recent adults who decide to use the funds for something much more important than college, like dogging their favorite music groups around the country in an old school bus. (And don't assume you can keep your 15-year old son from finding out about this potential pot of gold. I've come up with the idea for a new web site at www.howtofindyourhiddencustodialaccount.com. I'm sure it would be a hit with teenagers.) The problem with your plan, Jan, is that you may be violating the law (at least in a technical sense). The money was originally gifted by your parents to your son, not to you. Your legal duty as custodian is to administer the account for his benefit subject to the laws of the state in which the UTMA was established. If the law says that unspent funds become his direct property at age 18, there may be little you can do about it when that time comes, unless your attorney tells you otherwise. Certainly, you can decide to invest UTMA money in a 529 plan, but that decision shouldn't impair your son's rights to the assets. When you inform the 529 program administrator that the funds are coming from an UTMA, special restrictions are slapped on the account. For instance, you will not be able to change the account beneficiary to someone else. And if your son contacts the program on his 18th birthday (or whatever age is established under the UTMA) and requests a withdrawal, even if it's for something other than college, he will probably be able to get it. Even those 529 plans that don't have special procedures to enforce these rules will remind you of your legal obligations as custodian. Here's a better idea: Use the UTMA funds for expenses incurred for the benefit of your child. Private school and summer camp expenses are a no-brainer. Ask your attorney about other common everyday expenses that might be paid out of the UTMA. Then simply replace those funds by making contributions to a 529 plan where you retain complete ownership. Now your account beneficiary will never have access to the account without your permission. For more information about "UTMA Regret" be sure to take a look at Kaye Thomas' excellent explanation at http://www.fairmark.com