Can parents transfer money from checking account to decrease EFC?

So I’m in a kind of complicated situation right now where I live with my mom and my 26 year old brother. My brother is earning about 40K a year and lives with us but files his taxes separately. My mom earns about 15K a year and is a widow. However, she is the primary holder of the checking account, which has about 150K in it, and my brother is under her. Is it possible for my brother to open a new account and transfer a large amount of that money into there before I file the FAFSA? Would FAFSA still count that money under my family’s EFC or would he be considered completely separate in that situation

Whose money is it? That is, if one of them went to the bank and closed the account, getting cash in their hand, then the two of them split the cash and opened new accounts in their individual names, how much would each get when they both agreed the split was fair?

Whose money is it? If it is his money, it should be in his own account with his SSN as the primary account holder. If it is an interest-bearing checking account, he should be paying the income taxes on that interest, not her.

If it is her money, then yes, she should be the first name on the account with her SSN as the primary account holder. Moving money elsewhere just to reduce its effect on the FAFSA is financial fraud that can get everyone in a whole lot of trouble.

But, frankly, I just gotta ask what on earth do they have in their minds that lets them keep 150k in a checking account? Is some huge purchase coming up that they need to be able to write a ginormous check for? it would make much better sense to distribute that amount of money over a number of financial vehicles such as an interest-bearing money-market account, one or more savings accounts, one or more IRA accounts, one or more savings accounts, etc. Before you file the FAFSA, the whole lot of you should pay a visit to a financial advisor. Chances are that the bank where that checking account is held has an advisor on staff.

Depending on your mother’s financial situation, that 150k might not even be taken into account by the FAFSA. Here is the link to the 2019-2020 FAFSA formula. Print it out and work through it with your mom to see what federal aid you are likely to qualify for.

https://ifap.ed.gov/efcformulaguide/1920EFCFormulaGuide.html

So…your mom’s income is $15,000 a year.

Do you qualify for free lunch or some other means tested benefit like SNAP?

OR

Was your mom able to file a 1040A or 1040EZ in 2017?

OR

Is your mom a dislocated worker?

If so, her assets (that includes bank accounts) would not be counted as you would qualify for an auto $0 EFC…

BUT if you apply to colleges using the Profile, that money in the bank account WILL be counted as an asset.

Why in the world does a 26 year old have a huge amount of money in an account held by his mother? What is that all about? And…gotta ask…where did this $150,000 come from? Even on $40,000 a year, it would be hard to save that amount of money for your brother since he graduated from college.

The money was originally my father’s who had a 70K income but he passed away 6 years ago. Now my mom is the primary holder of the account with my brother under her. So it’s all kind of a mix

My mom did file a 1040A in 2017, I do qualify for free lunch but not SNAP…so since I do then none of the money in the checking account would be considered?

When you complete the FAFSA, you will be asked if you qualify for a means tested benefit. If you do, and your income is below the threshold…your assets are not counted. The FAFSA has Skip logic, and if you qualify, the asset question won’t even appear.

But the money in that account sounds like it’s your mother’s and not your brother’s. So if you DO need to report it…you will need to report it all.

So…NO transferring it to another account won’t matter. The money is hers regardless of where she puts it.

@BelknapPoint could you clarify this too!?

There is nothing “mixed” about this…at all. Your mom is the holder of a bank account with $150,000 in it. That your brother is a secondary person listed on the account doesn’t matter at all. The money is your mom’s.

It sounds as though the brother is an authorized signatory, not a joint owner, but the OP is understandably not clear on the different concepts.

Ok so I just clarified and my brother and mom and JOINT-OWNERS of the account. I don’t see how it would be a problem since he wouldn’t be “taking” my mom’s money if my mom transferred the money?

If FAFSA has “skip” logic then why does the net price calculator for a college (trying Barnard here) say I have to pay more when i say mom has 150K in checking?

While the money may not show up as an asset on the FAFSA, Barnard also uses the CSS profile where the money would have to be reported. It is going to be a challenge when it comes to your mother and brother co-mingling funds. Schools can ask for any and everything when it comes to giving out their money.

The goal of need based financial aid is to give money to students who have a financial need, not so that your mother can keep $150k in the bank.

Your brother needs his own account, even if he is listed on your mother’s account (that in itself is not a bad thing).

If your mother inherited the money when your father died, then it is her money. If he had a will, and a portion was given to your brother, that portion is his (and if a portion we meant to be yours, held for you by your mother, then that is your asset. Comingling of your money is not a great idea, and can be a problem down the road. If you not applying to schools that use the CSS Profile, you should be ok for now, but this is still something that should be taken care of.

Barnard uses the Profile. Your assets WILL be counted for any school that uses the Profile.

It’s only the FAFSA that doesn’t count the assets in certain situations.

That is why Barnard counts those assets…and their net price calculator does too.

I don’t know what OP means when she says that “mom is the primary holder of the account with my brother under her.” The funds in the account can be legally owned by more than one person, but if mom inherited the money when dad died and mom hasn’t taken an affirmative action to gift any of the money to OP’s brother, and brother has not deposited any of his own money in the account, than all of the money in the account is legally owned by mother and if required would need to be reported as such on financial aid forms.

I think it’s best for mom and bro to figure out how much in the savings acct belongs to bro and move THAT money into his own acct.

I think mom and the brother need to HONESTLY figure out how much really belongs to the mom.

Your mum might consider looking at a way of holding that money in a better way than a checking account. It should be earning money, preferably in some kind of tax sheltered way. Have her ask about that on bogleheads.org. DO you mean a checking account? If she has 150K in checking, are there other investments you need to know about?

Just understand…regardless of where she puts that $150,000, if it’s HER money…it needs to be reported on the FAFSA as HER asset.

^ he says mom only earns $15k per year. Skip logic might mean that assets aren’t listed on FAFSA.

If your mother has any outstanding credit card or auto loan debt, then paying those off may reduce your EFC. It could also deplete her savings … which could lead to problems if she has a major unexpected expense in the future. She could even consider paying down any mortgage on her home. But with only $15,000.00 income per year, that savings account will never grow back and she should use care in spending it.

This student has this college list…

Most of the colleges on this list require the Profile…and there is no simplified needs test or auto $0 EFC for the Profile. None. The assets will need to be listed on the Profile. No exceptions.

As an out of state applicant…acceptances to UNC, UVA and UMich certainly are not a slam dunk either.

Can you find some schools that are FAFSA only?