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Author: JSRdaMan One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 8153  
Subject: Cash Inheritance & Fin. Aid Questions Date: 7/8/2000 10:08 PM
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I have a few questions for any Fools knowledgeable in the college financial aid application process.

OK, here's my situation:

I will be receiving a cash inheritance (~$50-100K) sometime in the next few months.

I will be filling out financial aid forms in early 2001 for my daughter, who will be enrolling in college in the Fall, 2001.

How will these inherited assets be treated in the financial aid application process?

Is there any way that these new assets won't be considered at all? What would I need to do, put the check under the mattress?

Seriously, do I have any legal, non-fraud, options for sheltering these assets? If there are other options, how would the liquidity of the assets be impacted?

Thanks for the help, Fools. Also, if there are other websites you could point me to that address my needs, that will be very much appreciated.





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Author: jkrou Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2591 of 8153
Subject: Re: Cash Inheritance & Fin. Aid Questions Date: 7/8/2000 10:37 PM
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JSRdaMan:

One direction you may want to investigate is having the funds go directly into a trust vehicle where you will get the interest quarterly, or something along that line. The interest would increase your annual income but the big hit would not. For this to work, you would have to enlist the assistance of a good estate/trust lawyer. And, even then you may not be fully out of the woods.

On the other hand, why not pay for the kid's college and stop worrying?

Jenn

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Author: JSRdaMan One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2592 of 8153
Subject: Re: Cash Inheritance & Fin. Aid Questions Date: 7/9/2000 8:01 AM
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Thanks, Jenn.

Trusts are financial tools that I know nothing about. Looks like I have some research to do. Your post implies that I could use a Trust to generate a passive income stream, without "paying" for the lump-sum inheritance, also. That is an idea worth pursuing further.

I would greatly appreciate any help directing me to sites that would help explain the different types of Trusts I might consider.


As for the comment:
<< On the other hand, why not pay for the kid's college and stop worrying? >>

Two factors come into play:
1. Starting in 2001, I'll be "supporting" (12) college tuition payments over the next (13) years for my three children. This projection is for undergraduate tuition only, and assumes no "add-on" years due to switching majors, coop programs, etc. The inheritance amount won't last long enough to cover all the projected payments.

2. I have a personal philosophy that the student should have some financial responsibility for their college education. Even if I could afford to foot the entire bill, I wouldn't. I learned from personal experience that, from age 18-24, you tend to make better decisions when it's your money on the line.

Actually, I was hoping to use the inheritance money to help fund any post-graduate work that my children may pursue. But, needless to say, the college financial aid process is designed to get my money now, not later.

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Author: FoolWAM One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2593 of 8153
Subject: Re: Cash Inheritance & Fin. Aid Questions Date: 7/9/2000 10:21 AM
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You need to start planning now, and I would have the forms filed out and ready to send in by 12/31/00. Financial Aid is awarded on a first come, first served basis. Get the FAFSA mailed on 1/1/01. If you want your child to attend a private school, they may also require the PROFILE. Those sometimes need to be submitted during the fall of your child's senior year in high school.

If you own the assets, they will be counted under your name in the financial aid formula at a rate of 5.6% as opposed to assets in the student's name being assessed at 35%. Obviously, the more assets you have, the lesser amount of financial aid you will receive.

Most retirement assets are usually not counted by the financial aid officer but can at his or her discretion. I would not necessarily recommend this since it will tie up your money where you might not want it to be. A trust is not a good idea and will certainly be looked at by the financial aid officer as an asset to be included. As well, once the trust has been set up, they can be difficult to change.

See my annuity solution above; the same can be done with funding a life insurance policy, but tread carefully on those options!

I have written an article on college funding; it may give you some more useful information in your search. Here is the link; when you get there, simply click on College Funding at the left margin.

http://www.scottkays.com/KFACUniversity.htm

Good luck!

Alan




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Author: Bullfin One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2598 of 8153
Subject: Re: Cash Inheritance & Fin. Aid Questions Date: 7/10/2000 11:26 AM
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You need to start planning now, and I would have the forms filed out and ready to send in by 12/31/00. Financial Aid is awarded on a first come, first served basis. Get the FAFSA mailed on 1/1/01. senior year in high school.

Whoa. You need tax info. including w-4's to fill out the FAFSA. No need to rush this much. Some schools may place a priority deadline of postmaked by Feb. 1st but priority deadlines vary from school to school. Some schools award on a first come first served basis but others hold and award on a need basis after they see the applications. Other schools are flush with cash and make rolling awards as paperwork arrives.

I agree with the earlier post. Pay for school for the kids. Make them responsible for spending money, books, fees I.e they have to have a part time job. Basically how it work is that if you only have one kid in school, even with more headed that way, your assets count toward that kid only.

Make a deal with them that if they flunk out screw up etc. that they have to pay you back.

Or flat out loan them the money, (Bank of Mom & Dad) with appropriate paperwork that you want them to pay you back. You can later forgive a portion.

Make grade performance a requirement for your continuing support.

Anyway you can delay the distibution until after Jan 1? That would help for the first year at least.



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Author: NellieD Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2608 of 8153
Subject: Re: Cash Inheritance & Fin. Aid Questions Date: 7/10/2000 8:49 PM
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I will be receiving a cash inheritance (~$50-100K) sometime in the next few months.
I will be filling out financial aid forms in early 2001 for my daughter, who will be enrolling in college in the Fall, 2001.
How will these inherited assets be treated in the financial aid application process?
Is there any way that these new assets won't be considered at all? What would I need to do, put the check under the mattress?
Seriously, do I have any legal, non-fraud, options for sheltering these assets?


Here are legal, ethical options for your inheritance.

Money in Retirement funds is "invisible" to the financial aid formula. Fully fund your own retirement, max out your 401k, open up IRAs (Roth or Regular) for your wife and daughters (if they qualify).

Pay off your mortgage. The value of your Primary Residence is not considered an "asset" for financial aid.

Or, pay off any other debts. The one-time income will affect the Financial Aid for the first year that your oldest daughter is in college, but once it's spent, it will no longer be an asset that has to go on the financial aid form.

Hope this helps,
NellieD


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Author: JakeP21 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2631 of 8153
Subject: Re: Cash Inheritance & Fin. Aid Questions Date: 7/14/2000 1:32 AM
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Something that I haven't seen anyone suggest yet regarding this post....

Contact the school(s) financial aid office. I have worked as a full-time/part-time counselor in the financial aid office at the school I attend (will do so again this next year).

It will still be considered income, for purposes of filling out the FAFSA.

Some schools will look at the "one-time" income and possibly take this into account, potentially even removing the entire sum, as though you never received any of it.

I routinely looked at cases exactly like this..ranging from inheritance, to gambling winnings (yes, sometimes even that is taken out), insurance settlements, etc.

Each school has its own way of doing things, some may not even help at all. You just have to check. Also, how the money was used (pay debts. vs taking an extended vacation) may also impact the outcome.

I hope this helps. Just my $0.02.

Jake

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