A couple of questions for the experts who've been through this:

My mother set up UTMA accounts for our 2 children (high school freshman & 6th grader). I provided our kids social security numbers and so I believe these are custodial accounts that put the kids in control at the age of majority (18/21 depending on what the state of FL says?).

Having read several postings here and at a couple of other sites (Savingforcollege.com, Clarkhoward.com (http://clarkhoward.com/topics/529_guide.html), independent529plan.org), I'm getting the impression that it might be advisable to convert the UTMA accounts to something else, most probably a couple of 529 accounts.

One item in particular that influences this thinking is from the Independent 529 site where they compare different types of college savings plans--looking at the Federal Financial Aid Impact I see:

Ind 529 Plan Considered parental asset. Generally assessed at up to 5.6%.
529 Savings Plan Considered parental asset. Generally assessed at up to 5.6%.
529 State Prepaid Plans Considered parental asset. Generally assessed at up to 5.6%.
Coverdell ESA Considered parental asset. Generally assessed at up to 5.6%.
UGMA/UTMA Considered student asset. Generally assessed at 35%.

Question #1: What does it mean that the UGMA/UTMA is generally assessed at 35%? I understand the "generally" part, but not the idea of what gets assessed.

In considering the possibility of converting the UTMA accounts to 529 accounts, I see the following from the state of Iowa's 529 program description:

The custodian for a minor under the UGMA/UTMA may use the assets held in an UGMA/UTMA account to open an account in College Savings Iowa, subject to the laws of the state under which the UGMA/UTMA account was established. The minor may incur capital gains (or losses) from the sale of noncash assets held by an UGMA/UTMA account. Please contact a tax professional to determine how to transfer UGMA/UTMA custodial assets and what implications such a transfer may have for you.

Question 2: The UTMA accounts were set up in Wisconsin, how do I find out if my kids will incur capital gains from the transfer?

I'm assuming here that since the asset in question in the UTMA is a mutual fund that it will have to be cashed out before being moved over to a 529. I also understand that if I were to do this conversion, the funds from the UTMA accounts would convert to their own 529 accounts. That is, if I wanted (and I do) to add money to 529 accounts, the new money would need to be kept in separate accounts from the UTMA transfer money.

Thanks!