<p>I recently attended a financial aid workshop at my son's school.
The presenter made a statement that a parent can claim half of the amount of their child's trust fund as their own when filling out the FAFSA. Does anyone know if this is true...and if it is - would this also be true with a custodial account??</p>
<p>? Cash value Life Insurance ?</p>
<p>Trust funds can be "the kiss of death" in financial aid world unless
there would be no "need based" aid in the first place. The 50-50
split you describe sounds highly suspect to me. A careless statement
was made to a general audience that could (and would) be misunderstood
if they felt it was in their best interest. Not a smart idea at best and dishonest at worst. </p>
<p>I would need to see the Trust precis. So might the college. Who is the benificiary? Who is the trustee? What is the trust's purpose. Simple, compound, generation skip trust or what? Attorneys sometimes try
to get around the college's future assessment of the money (if the student is the future beneficiary) by specifically stating in the trust document that the money is for only medical, health and shelter needs (leaving out educational needs). That won't work, because the COA of a college includes room and board and personal expenses too. Middlebury, Amherst, Bowdoin, Williams etc. etc. will smile and say "nice try". </p>
<p>Trusts can be very complicated with rules and strict distribution requirements contingent on certain circumstances, such as the minimum age when the money can be accessed. Often the college will not care about that. Having said that, however, financial aid leveraging and "preferential packaging" can play a part. A well prepared letter (without too much legal jargon) should be sent to the financial aid office soon after filing the FA forms (not after acceptance) requesting them to place most or all this money out of their IM EFC calculations. If they really want the student that can work wonders. </p>
<p>Custodial accounts (UTMA and UGMA's) are simple trusts and reported as the the beneficiary's asset on the FA forms not the custodian's.</p>