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<<My son is turning 18 on April 7.2000. He has two custodial mutual account funds. The larger one which is worth about 44,000 has my father-in-law as the custodian and the smaller one, worth about 2,850, has myself his mom, as the custodian.>>

That's great.

<< For college financial aid purposes, I know it it better for the funds to be in the parents name and I know he can transfer these to us if he wants to at 18, when he legally has to assume ownership of them.>> the form of a gift? Uncle Sammy might not be to keen about that. And, if your son is bright enough, he may realize that you are, in fact, taking his money. He might not like that either.

<< We plan on closing out the 2850 fund when he is 18 and taking 30000 from the larger one and putting into something more liquid to pay for the first year tuition. His first choice college is about 27,000 and I don't know how much financial aid he would be eligible for with all those mutual funds in his name.,along with the 30,000 from the larger one when he is 18.>>

Nor do I. You'll have to deal with this issue with the financial aid web sites. Or you can have this discussion in the "Paying for College" message folder.

<< Do you think he should withdraw some of it before 18 while it is still at the custodial tax rate, or will the amount of capital gains affect his income for next year adversely?>>

Again, the taking of the funds will not make Uncle Sammy too happy if he finds out. And your son also might not like this idea. But you've gotta do what you think is right.

But my opinion is that taking funds from a custodial account is tantamount to sealing from your child. They are HIS funds...with his name and SS number on the account. That might sound harsh, but it's the reality.

Just my $.02
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