<p>In a few months, I am receiving what I guess would be considered an inheritance - someone in my family died and left me money when I was much younger, and a financial adviser at Edward Jones has been taking care of it ever since then. I don't know everything about the account, but I know there are stocks involved with it (as in, I think I own some stocks and the amount of money in the account goes up or down each month depending on how the market is doing). I'm not sure of how everything works (and I am not sure my mother does either), but my mother is advising me to not take the money out of the account when it is time, and to leave it in there for another year or so because she is concerned it will affect our FAFSA. She thinks that we will have to pay taxes on it, and then report it as income on our FAFSA. It is not a large sum of money - it would be around $10,000 by the time I took it out. Basically, my question is, is my mother correct? Would we have to report it as income on the FAFSA next year? Do I really have to pay taxes on it? It is a gift, and I thought the gift tax was for something like $13,000 or more. And would it negatively effect our EFC? I receive a Pell Grant now, and both subsidized and unsubsidized loans, and I would not want to lose those. Thanks in advance for any advice you all may have, and I'm sorry I don't have more information regarding the type of account.</p>
<p>It’s not a gift, it’s an inheritance. Yes, there is an inheritance tax. Why don’t you ask the financial person handling the money, or consult a tax attorney.</p>
<p>I think anything -under- $10,000 is exempt from inheritance taxes. I’m not sure if $10,000 is or isn’t. I think what percentage the tax would be it also depends what your exact relation to your family member was. All of this varies state-by-state, though. So, I second teachandmom: consult a professional.</p>
<p>There are a number of factors that impact the answer to your question. You really need to talk to a financial advisor to get the best advise. </p>
<p>Any inheritance tax would have been paid when the money was moved into the account for you, so that probably does not apply. Whether it was taxed would depend on the amount of money and the state you live in.</p>
<p>Depending on the investments in the account you may be earning income (via dividends or interest). If the “account” is a trust then the trust may be reporting and paying the taxes on that income. If it is not a trust, but a personal account, then you would be reporting this income for tax purposes, and it is something that would be on the FAFSA.</p>
<p>If you do sell the stocks then the profit from those sales is income - capital gains if the stock has been held long enough. This income would be reported on the FAFSA. You do not receive income (except for dividends) from stocks until you sell them.</p>
<p>If you go to (or will be applying to) a school that requires you fill out the CSS profile, then the value of this account would need to be reported as an asset.</p>
<p>I’m not sure how this works because I don’t know how those assets are being held. You inherited the money a while ago. They should have been reported as an asset for FAFSA to begin with. It isn’t income because you have had the money Unless it is in some very specific account in a way that is exempt from reporting to FAFSA, and I don’t know any such thing, you were supposed to report it whether or not you could gain access to it or not. Otherwise anyone can just stick assets and stipulate that a kid can’t touch it until after college so that it doesn’t count for financial aid purposed. So you may already be in violation of some aid laws. You need to talk to those holding the account in trust and let them know your situation. </p>
<p>But, yes, anything not an asset of your that becomes an asset of yours in the course of the year is INCOME for FAFSA purposes.</p>
<p>Well, I haven’t been able to touch the money until September of this year, so I did not think I had to report it because I technically did not get the money until my birthday this year. I was not aware I still had to report it. I also have been unable to get ahold of the person handling the money, but I have been trying to get in contact with him. I am sorry I cannot offer more information on the type of account - I wish he would answer his phone! We have been playing phone tag for over a week now. Very frustrating.</p>
<p>How will this affect my EFC? My mother makes anywhere from $48,000-$50,000 depending on the year and how much she works, so we are already not receiving that much financial aid, but a very good amount that definitely helps me out. I do not work though, and I also have a brother in college too. She is also a single mother and has no help whatsoever, and my father is absolutely not in the picture (he contributes nothing, and never has). So basically, the number that goes on the FAFSA is her AGI of $48,000-$50,000 and her taxes she paid and whatnot.</p>
<p>And where would my inheritance be reported on the FAFSA? Under “income” for the student? Or under where it asks how much the student has in savings?</p>
<p>Under what you have in savings.</p>