My sister and I are both beneficiaries of a qualified residence trust (can’t remember the exact term). Basically, the trust owns a condo but no other assets. I hold a small majority %. But I believe I could not sell the property without her consent. Furthermore, the trust document explicitly states that if the property is ever sold, the funds go to my sister. Long story.
Anyway, since I cannot sell the property and cannot receive funds if the property is ever sold, it seems to me that I don’t need to include as an asset. Is this correct?
We alsomost became part of a real estate trust. We declined…which is also a long story.
My understanding is that you have to,declare your %age of the value of the trust as an asset on the FAFSA…at least that is what we were told when we inquired.
It doesn’t matter whether you can sell…or not. The fact is…any trust can be disolved…but might take a legal resolution to do so.
Well that really sucks. Especially since the trust dictates that I’d never see a dime if it the condo is sold.
Can you give up your ownership?
I don’t know the provisions of YOUR trust. You might want to speak to a trust lawyer about this. It sounds like you can use this place but can’t ever benefit from a sale…I’m really not familiar with that.
Most trusts specify whether a person can be removed from the trust. And many specify how or if a sale is possible.
I would suggest you speak to a trust lawyer about YOUR trust.
Can you give up your ownership?
What is going on with the condo now?? Is it being rented out? Is there any current income from it?
Unfortunately, we’ve also seen this, eg, with a large number of family inheriting property that likely won’t be sold for a long time- eg, a family farm or vacation place. No comfort, but it also applies to trust you can’t access until some age is reached. One of those bugs they have yet approached, afaik.
If this is a bad impact on college costs, you may need to go for Professional Judgment, after an attorney. Prove you can’t tap any assets, are only serving (I’m guessing) as a managerial influence.
In addn to the income question, you want to clarify you (with your sister) can’t tap any assets in the condo.
thumper1: correct. I can use it but not profit from it. And we don’t pay the taxes or fees or anything and have no financial connection whatsoever to it. There is nothing in our tax returns about it. It is not rented out, and there is no income from it.
Honestly, for years I didn’t even know about it (mother passed away 11 years ago and left it in trust). If we’d filled out FAFSA 3 years ago, I wouldn’t have included it and would have apparently been in violation of the law.
I don’t think I can give up ownership, nor would I want to, for a variety of complicated family issues. The whole thing seems like a huge mess.
I’m not going to try to understand your family affairs…but you ARE gaining some financial benefit from this trust…in that you can use it without cost (right?). that IS a financial benefit.
Are we talking millions $$$ here…or $10,000? Assets for fafsa purposes are tapped at 5.6% of their value.
In addition, consider the following.
- The family contribution is primarily determined by income...not assets. If your income is above a certain amount...this could be much ado about nothing.
- Most colleges do NOT meet full need for all,accepted students. Again...you could be fretting about an amount that isn't going to make any difference in the actual financial aid AWARD the student receives.
I would,suggest you run the net orice calculator…using two different sets if numbers. In one, don’t include the trust value in your assets. In the second, add the trust value to your assets. See what the difference is. It will,be an estimate…but you ,at find that the difference isn’t much. Or that the net cost is still affordable for your family.
The MOST important thing to do is to determine what you can actually pay annually for college costs. Go from there.
In addition, if your student is a strong student, look for merit awards based on her stats. These will not be dependent on income…or assets.
thumper1, good idea. I just ran that new number and it adds $8k to our EFC (I figured $150k for my half of condo). That’s significant to us. We make $185k combined. And have 2 younger children. My father has funded 529s w/ about $50k/kid (in my name w/ them as beneficiary and included in FAFSA). We have no other investments and have a modest savings account. <$10k. Our EFC is $58k w/ the condo asset; $50k without. That just seems so insane, even the 50k. I need to ask a lawyer and/or accountant about how this weird trust will affect us. (And yes we can use it for free, but only get there for maybe 2 weeks each summer.)
I should mention here that my child would like to attend a top-tier liberal arts college (Amherst, Swarthmore, Pomona, etc), most of which do not offer merit aid. So I’m particularly anxious about how we will make up the difference. We will have increased income by about $30k in about two years, so that will reduce our EFC on renewals (appropriately).
Do schools w/out merit aid ever give you more than EFC? If we can get close, but still need $4k, for example?
I should’ve also said that my own estimate of what we can afford is $40k/year. We could possibly get to $45k, but no way could we get to $58k.
Well…the net price calculator says…your share will be $50,000 a year without the trust…and $58,000 with the trust.
The schools aren’t going to lower that to $40,000.
And, like I said…you DO get a benefit of use for the trust.
In your estimate of what you can afford, did you include the Direct Loan of $5500 your kiddo can take freshman year? Was that included in the aid the net price calculators estimated? If not…add that in.
Does your kiddo have a job? If not, that might be something to consider too. She can at least earn her discretionary spending money. Every penny counts.
And if she is a competitive applicant for the schools you listed, you might want to look at schools where she could garner some merit aid.
Also, look at your instate public universities…which will very likely cost less than $40,000 a year. Many have honors colleges…and in some places specific departments are actually very strong. Being in the honors college can make that big school seem smaller.
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but you ARE gaining some financial benefit from this trust…in that you can use it without cost (right?). that IS a financial benefit.
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while i agree that she’s getting some benefit by free use, but I don’t think that should be the litmus test. After all, many of us have parents who owned vacay homes that we could USE for free, but no one claims that “financial benefit” on FA forms.
@contdes Is there another family member that you can give your share to other than your sister that will not cause complications?
Who is paying the taxes, insurance, utility bills, and upkeep?
Adding…you have $185,000 in income (is this before or after taxes?). You have $100,000 in 529 money.
In my opinion…with just THAT you would not have received a lot of need based aid…if any…from most colleges.
The $150,000 value of the trust really isn’t THE issue.
Schools that are “meet need only” won’t give more than the Cost of Attendance minus the EFC they determine for you. But take a hard look at the COA. It often includes slush. Eg, most of us found renting books or buying used brings down that cost much below what the college estimates. (Whether this works can depend on major.) School health insurance may be included and your son may already be covered by your qualified policy, etc. If your son’s NPC projection didn’t include the fed student loans, that can be an option.
sorry for some x-post.
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Adding…you have $185,000 in income (is this before or after taxes?). You have $150,000 in 529 money.
In my opinion…with just THAT you would not have received a lot of need based aid…if any…from most colleges.
The $150,000 value of the trust really isn’t THE issue.
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@thumper1 is right…with that $185k income and $150k in 529… (3 kids…$50k each)
The 529s were not funded by OP. Be careful in making presumptions about someone else’s financial situation.
The OP says no assets other than a <$10,000 savings.
What about home equity? Any of that…because some of these schools use that too.
If your income increases…your EFC will INCREASE. It won’t reduce…
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Our EFC is $58k w/ the condo asset; $50k without
Do schools w/out merit aid ever give you more than EFC? If we can get close, but still need $4k, for example?
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Your child can take out a $5500 fed student loan and work/save over summers to cover that gap.
@BelknapPoint
If the 529 accounts are held in the parent name…do the full values of all need to be listed on Kid 1’s fafsa and Profile?