<p>If you have money put aside and it’s been collecting interest (a scholarship fund of any kind from Grandparents counts) it should have been reported to the IRS as income interest for each child.</p>
<p>If it has, as it should have been, been reported to the IRS annually then you absolutely MUST let the schools know or it could cause problems for you.</p>
<p>If you haven’t been reporting it to the IRS (please note: as required by law), then I guess you can make the choice as to whether to report or not. I suppose many people are in this position and never have reported the money but check with your parents and grandparents first before making the decision not to report this money to the schools. Since you will be submitting IRS documents for both yourself (if applicable) and for your parents make sure this money hasn’t been reported on those documents before making a decision not to let the school know.</p>
<p>If the fund is filed by your grandparents as a future school fund with grandchildren’s names attached I think you would be much smarter to report it.</p>
<p>And yes, the way Hopeful Ham has set up the funding from the grandfather will probably protect those sisters as the money is technically the eldest sisters. That was a good way to shield the money. However, you’d best check with grandparents, the way you describe your situation (you get access at 35 if you don’t use the money for school) makes me think the account is linked to your name and then you probably would be better off to report it. I’d talk it over with your grandparents before deciding not to report.</p>
<p>Sorry actually I think the more important linkage would be through your Social Security Number so if your name but especially SSN is connected to the money set aside I would highly recommend reporting it. With the internet these days it’s pretty easy to run a SSN check as opposed to the “old” days where banks would have been contacted individually.</p>
<p>How to make the most of your college savings:</p>
<p>If you are expecting aid on the FAFSA, and if the money is in the name of your grandparents, don’t touch it until you graduate. You heard me right, take out loans and use the GParent money to pay them off. If they give it to you during college, the college will count it as gift and decrease your financial aid. If you’re getting no financial aid, then use it as you will.</p>
<p>Also, if you’re getting financial aid, use all of YOUR money first. Do you have money saved from a summer job? Use it all the first year. Take out your loans only after you’ve used it - don’t ‘balance it out over the 4 years’ - that’ll end up costing a few extra thousand. If you use it first, they can’t count it the next few years.</p>
<p>It is possible to “hide” money, but not easy (I won’t get into the morality of it). I notice that CMU has some ways to “check” on kids assets. All t he 529 plans and the coverdell savings programs have to pay directly to the school so the school then knows you have these (even if the “owner” is a grandparent). If, on your FA, you did not put down these assets they will see them as they start paying for some of your expenses. Then the school will start to ask questions. My son won a 529 plan as a scholarship (which we declared in the supplemental CMU forms) but it showed up like a 529 private plan when it send money to my son’s CMU account…CMU called to check even though we don’t qualify for FA to make sure that there was no inconsistency between what we put in the forms and what they observe in S’s payments. </p>
<p>Remember that if you inherit money it will show up as a gift for the purposes of taxes the year of the inheritance or there will be interest earned on the account in subsequent years, so again, your tax returns will indicate the existence of these assets. If an older sister inherits all of the money but has a verbal agreement to distribute, she, should, be paying taxes on that amount BUT any transfer from HER to pay sister’s tuition constitutes a gift and therefore should be declared. If the amounts are relatively small you probably won’t get “caught” but substantial transfers will end up being reported to the IRS. We have a lot of privacy protection here but not for financial transactions (we are not switzerland). For both the OP and the other student discussing this issue, you should work with a tax accountant. It is not terribly expensive and will prevent you from screwing up your taxes. It is all very well to advise someone to lie on your FA forms because the likelihood of being caught is low and the penalty is just to pay more of your tuition, but tax avoidance or fraud has serious implications financially and otherwise. The transfer amongst sisters described above could mean that wire fraud has been committed as well as various tax violations. Say hello to a felony conviction and decide whether trying to avoid paying your fair share of tuition is worth the risk.</p>