This is a hypothetical. I am trying to understand something.
If you have an asset or cash that is in an escrow or otherwise not available to you but will be available a month after you fill out the FAFSA/CSS do you have to include it?
For example you sold an option on something (so as an asset has no value to you) and the proceeds are in escrow until next month (for example), lets say it is 100k. Do you have to include it on a FAFSA or CSS you fill out today? A similar example would be you have been told you are getting a large bonus or commission but will not be getting it until next month but it is guaranteed that you will get it. Thank you
Yes. An asset is an asset, whether it is liquid or not.
A bonus or commission is NOT an asset until realized. You don’t have future earnings until earned.
Under this logic, funds collected by a mortgage company on a monthly basis and held in escrow to pay property taxes and homeowner’s insurance should be reported as an asset on FAFSA and Profile. Agree or disagree?
They should be, but I doubt most people do. If you don’t have a mortgage but use a savings account to deposit funds every month to pay taxes and insurance at the end of the year, wouldn’t that be included? Same money, just depends on who is holding it. I doubt many people include the security deposit or last month’s rent on their FAFSA, but that’s money held for them and sometimes held in a savings account or trust account by the landlord.
Many escrow accounts have several thousand dollars extra collected every year because of bad formulas or out of date tax rates. Shouldn’t that be included? My friend used to argue with her mortgage holder every year that they were collecting too much, but they wouldn’t reduce it and she’d get a $3000+ refund every year.
Whose name is the escrow account in?
Yeah, and the liquidity is also at opposite ends of the spectrum. Try telling your mortgage company that you want to take some money out of the escrow account that they manage for you so you can buy groceries.
“Whose name is the escrow account in?”
Interesting question. Most lawyer escrow accounts are in the name of the lawyer who is holding it for a client or as a result of a transaction. Usually it is contingent on something happening, eg permits must be obtained and if they are or are not the escrow is released to one side or the other. In this case it just cannot be released until one party does X.
I do not think title to the asset or money transfers until the lawyer releases it.
In the case of the bonus, even if I know about it on the day I file FAFSA/CSS and I have earned it but it will not be released to me until a month later, that is ok?
One other question, related more to mortgage escrows, if I write a large check for something and have given it to the other person but it has not been cashed yet, is it still reportable?
Isn’t a bonus income? If you receive a bonus the day before you file your FAFSA this year…in 2016…that bonus would be income for the 2016 tax year. You would include that on the FAFSA for 2018-2019 (using prior prior year taxes from now on). That FAFSA will use income from the 2016 tax year.
And if you happen to have the money sitting in your bank account the day you file that 2018-2019 FAFSA…it would be an asset also.
When people are trying to qualify for something like a loan or to purchase a co-op and have to prove a net worth, all these little things are claimed as assets - the savings bonds and the deposits on utilities and the escrow account and the value of the whole life policy, the escrow money in the attorney’s account. Grandma silver is worth a ton of money and so is the baby grand piano. When these assets will hurt, as in financial aid application, they suddenly don’t come into play. Yes, I know that most tangible assets aren’t included on FAFSA but it is interesting that the same person who viewed a bond or account as a non-asset suddenly thinks it is one.
@thumper1 yes a bonus is income but that is not something that is an issue until 2018 due to the prior prior year.
I am asking the question from the asset point of view only which is based on what is in your current bank account.
If you get a letter from your company saying, on May 1 you will receive X as a bonus or whatever or it will be released from an escrow account, and you file a FAFSA/CSS on April 8, does it get reported as an asset?
@twoinanddone I think it is also the way the FAFSA is written, what is in your bank account TODAY. If I only got paid once a month on the 1st, of course I am going to fill out the FAFSA on the 30th. I think I just answered my own question, since if filling out the FAFSA you do not take into account your next paycheck as an asset even if you are scheduled to get it the next day! It is what you own directly or through a trust today, not what is contingent I would think.