Cashing in a mutual fund and paying taxes. Question for anyone who might know.

[Hyacinth]

I realize I probably need to talk to an accountant, but the Hive is the next best thing in a pinch, so . . .

My dad set up a (UNIF Trans Minor Act) mutual fund for my son years ago. It has grown to about $10k and my son wants to redeem it for college this fall. The fund is registered in my name, but we can easily do the paperwork to change the registration to his name (as it's technically his, and has been since he turned 18. At least that's my understanding.) Taxes will need to be paid on this money. So, will we pay more taxes if it's in his name or in mine? Or will it not really make a difference? And does either option play into how financial aid will be calculated next year? Thanks, wise ones. 

[Bootsie]

Your options are going to depend upon what state you are in.  For some states, the age of majority for transfer of UTMA is 18, for others it is 21 (or can be 25 in Florida if transferor chooses).  It is your son's money, so it will be considered in financial aid calculations.  Remember that it is capital gains in the year for which taxes are owed, not on the $10,000 balance.  

[gardenmom5]

I sent your question off to dh and 2ds. 

here's DH's response:  (if I get a response from 2ds, I'll post it.)

Only the income on the funds is taxable. The original deposit is not. If your son has low income, have the account transferred to his name and there would probably be no taxes payable. Financial aid is usually determined by the financial resources of the whole family. When doing the Financial Aid form it would probably be better to include the funds as belonging to the family not to your son specifically so do the financial aid form before transferring ownership of the account to your son.