<p>My mother has some money for my kids - preferably for college. What should we do/ not do with it? What kind of account? In whose name?</p>
<p>I have a college sophomore, a rising senior, a rising sophomore and a rising sixth grader.</p>
<p>I am currently going through a divorce. I am not sure if that makes a difference or not.</p>
<p>Thanks!</p>
<p>I would talk to your lawyer first about the timing of the money. If you receive it before the divorce their may be implications.</p>
<p>Your divorce attorney should be advising you about how that will affect the financial aspect of the divorce. If your soon to be ex is aware that your mother might pay for college, if he has a good attorney, he will attempt to leverage that so that it’s something off of his obligations. COllege costs and who pays will figure largely in the settlement. My advice about grandma’s money is for her to will it to the kids and leave at that for now, but I’m just a poster on a messge board. Anything else she does with it will offset college obligation for the kids’ father. But again, that 's something to discuss with your attorney.</p>
<p>Once that is all taken care of, the divorce thing, it’s usually best to have grandma or other family members lend the money to the kids with agreement, interest charged, the whole 9 yards, and then those loans can be forgiven at graduation or after the last FAFSA is filed, if fin aid is even in the picture. If it’s not, the it’s up to your future ex and you to wrangle out who pays how much, and in my experience the exes welch like crazy most of the time. </p>
<p>first, dont have mom give anything prior to the divorce. </p>
<p>then, have her give the money to YOU, annually, with the intent that you will use the money for college. If she were to give the money to your kids, it has a more negative affect on efc.</p>
<p>I agree that you should talk to your lawyer. What’s best depends on a lot of things, including how much money different people in this situation have. If everybody has a lot of money (i.e., if you aren’t going to be getting need-based financial aid), it may ultimately be best to have the grandmother pay colleges directly, because of the beneficial tax treatment of such payments.</p>
<p>You didnt say if financial aid is an issue. if its not, Grandma can give up to 14K per child/year without hitting gift tax issues, or even more if she uses 529’s. She can also give 14K to you each year. 529s can be nice if grandma wants to reduce her income tax burden, but the money is then tied to college. </p>
<p>If your children qualify, or will qualify, for financial aid be aware that some forms, specifically the CSS, will ask about grandma’s money and reduce their aid if reported. If this is an issue you may want to be less transparent about the assistance. </p>
<p>-If possible, wait until the divorce is finalized before any money is transferred to you or your kids.</p>
<p>-If your mother opens 529 accounts for your kids, that money will be considered a parent asset for FAFSA purposes, meaning there will be less of a financial aid hit then if the money was given directly to the kids (CSS/Profile schools may treat 529 accounts differently).</p>
<p>-If you have enough to pay for the first three years, consider having your mother wait until each kid’s senior year of college before making the gifts. That way, the gifts will not impact financial aid.</p>
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Even better, if she pays the money directly to the college, there is no gift tax limitation, and it doesn’t affect the 14K that can be given directly. Most of us are not fortunate enough to take full advantage of this, however.</p>
<p>A buddy jokingly said that it doesn’t pay to have any money saved for college and any savings should be stuffed into a mattress. Not sure what he meant by that. He has 3 kids in college and can’t wait for them to graduate. </p>
<p>It’s about 5.6% of assets that are hit by FAFSA towards the EFC and that’s after the asset allowance. I don’t think that’s so bad. It’s rare that it doesn’t pay to have money saved for college (though the cases can occur) and any savings stuffed into a mattress are required to be reported by the Federal Government for FAFSA purposes. </p>
<p>For the OP, keeping grandma’s willingness to pay for college would be a good idea. I have seen time and again that if there is even the tiniest bit of wiggle room, that is taken out of the financial settlements.</p>
<p>If she is willing, Grandma should pay any money she has set aside for her grandchildren’s education directly the the college when the tuition bill becomes due. She should not give it to the Mom or the kids, with the exception of $14 / year .
If the family will need FA to pay for college , Mom should NOT include Grandma’s assets in FAFSA / Profile applications. </p>
<p>Actually, if grandma pays the college directly, I believe the amount paid will need to be reported on the following year’s FAFSA form as money paid on behalf of the student. </p>
<p>If the grandma makes a gift to the parent, that does not get reported on the FAFSA.</p>
<p>You should consult a lawyer, not the internet.</p>
<p>If you know that your kids are getting money for college, it should be disclosed as part of the divorce process.</p>
<p>Hiding that and then it later coming out? Not good.</p>
<p>Paying directly to the college is an exemption from the unified gift/estate tax. But that tax only comes into play if Grandma has an estate above 5MM (otherwise it can be ignored), in which case the question probably wouldn’t have been asked in the first place. My sense is that the advice to delay the transfer and then give it to the parent is probably the optimal advice. </p>
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<p>I’m pretty sure this is incorrect. (But you should check.) Even in a 529, the money would still be under your mother’s control, not yours. She could decide to pay someone else’s tuition, rather than the person whose name is on the account. Since the money is not your family’s, you don’t have to report it.</p>
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Not so - departing ex and divorce lawyer need not know what Grandma plans to do with her money. Grandma’s money is not part of the marital estate. Ex’s support obligation is based on his or her assets. Grandma should see a financial planner or estate lawyer herself to ensure the money goes where she intends it to go. </p>
<p>Hi OP, I’m hoping your soon-to-be-ex doesn’t read this board. You should keep mum about the money and tell your mother the same, until after the divorce is final. </p>
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<p>Good catch. If the grandmother opens 529 accounts naming a grandchild as the beneficiary, grandma is the account owner and the account assets are not reported on FAFSA. What I meant to say was if the grandmother gives the money to the mom, who then opens the 529 accounts, that money will be considered a parent asset for FAFSA purposes.</p>
<p>There are so many complicating factors that I agree with the poster above- check with a real lawyer who knows your family situation, not a bunch of strangers on the internet.</p>
<p>Grandma could go into assisted living and the money she intended to be paying towards tuition (whether directly to the college or to the kid, or into a 529) could be needed for her own care. Grandma could die (she should live and be well of course) and her will may stipulate an entirely different disposition of her assets (which of course is her right) and the executor’s hands will be tied- he or she may know that Grandma “intended” to pay tuition, but the executor is responsible for carrying out the terms of the will. Mom may remarry-- new husband may have college aged kids, and the question of who gets what towards tuition- custodial parent, non-custodial parent, yet another grandparent- could muddy the waters. ex-husband may discover inadvertently that the grandma is funneling money towards the kids (a cousin may stay friendly with the ex even if everyone else in the family treats him like nuclear waste) and then bring the ex-wife back to court to challenge custody, have the other provisions of support renegotiated, etc. So the potential upside of having grandma foot some of the bill gets frittered away in court on lawyers fees, etc.</p>
<p>I am not a lawyer, but I have seen the good, the bad and the ugly when it comes to divorce and college. Your lawyer should be able to advise you on how this generosity of grandma’s can be a wonderful thing, and how to avoid the potential pitfalls and nastiness. Losing financial aid is the least of your problems.</p>
<p>On the other hand, if grandma keeps the money and pays directly, and then has a health issue, then grandma can use that money to pay for her health issues. So would grandma prefer the money be in her hands and flexible or definitely earmarked toward the college costs. </p>