I have seen the advice here (and elsewhere) that to not have an affect on financial aid, it is better to receive gifts after Jan 1 of the child’s sophomore year. This would include withdrawals from grandparent 529’s account and straight gifts from the grandparent. The reason for Jan 1 of the sophomore year is due to prior prior income used by the FAFSA and CSS Profile. This all makes sense to me. However, there are questions on the CSS Profile that ask about current/future years. On this year’s profile, that uses 2017 income tax figures, there is a section called “Parent 2018 Income and Benefits” and “Parent 2019 Income and Benefits”. These sections do ask about untaxed income.
My son is in his sophomore year and Jan 1 just passed. Grandma now wants to help out a bit. I certainly can complete the current CSS Profile (for son’s junior year) before any gifting. But if she gifts any money in 2019, I would think it would certainly show up on next year’s Profile in the “Parent 2019 Income and Benefits” section. I understand that next year’s financial aid will be considered using 2018 income for his senior year. My question is do these current/future income sections have any bearing? If no, why are they there if they are not used?
A gift is not untaxed income, it’s a gift. I think the ‘Do not include’ sentence is including something as income that is NOT income. It they asked another question about gifts, I’d include it but I wouldn’t call it untaxed income.
Help or more confusion? Can’t link the source but google
PROFILE 2017-18 FAQs and Glossary
"I received a gift of $500 from a friend of the family. Should I include this as part of my
income?
Do not report the gift in more than one question on your PROFILE Application. If you included the gift as an asset in section SA, do not list it as income in Section SI. Otherwise, it should be included in the amount reported as “other” income in SI-160."
"A family member will be giving me some money on my 19th birthday. Should I include this money on the application now, or wait until I actually receive it?
The amount you anticipate receiving from your family member should be reported in SR-165. Explain the source and nature of the gift in Section ES."
I think the directions are pretty clear, although worded awkwardly. I certainly have read in multiple places about withdrawals from grandparent 529s being untaxed income. The advice I have seen has always been to refrain from doing grandparent withdrawals from 529s till Jan 1 of sophomore year. Given the “Parent 20XX Income and Benefits.” questions, I wonder if it is the best advice.
What makes you think it might not be the best advice? A distribution from a grandparent 529 is for the benefit of the student, not a parent. And while a future distribution from a grandparent 529, or any gift from a grandparent, can be anticipated, it’s never a sure thing until it happens. The reporting of anticipated gifts should not have any negative impact on the award of need-based aid.
Still trying to get my arms around my current situation and whether there is any impact in grandma gifting me any money now (after Jan 1 of student’s sophomore year) given the question about “Parent 20xx Income and Benefits” for years other than the prior prior year. I believe I have seen places mention that gifting after Jan 1 of sophomore year has no affect, but then there is this question. I guess ultimately it is up to the school to decide how they want to use this question.
Do you HAVE grandma’s money? You can put any amount you want in that field on the Profile but the fact is…until you HAVE the money…you don’t have the money.
The schools aren’t going to assume that grandma will hold true to a promise. Maybe grandma will need her money for something else. Maybe she will change her mind. You don’t have that money…yet.
If that money wasn’t already in MY accounts, I would put $0 in that field.
I have not received anything from grandma yet, but I am concerned about a different case. At some point in the future, I imagine she will want to gift us money unless I tell her that my son would lose some financial aid as a result. I am not concerned about the financial for 2019-20 (the current Profile). However, next year, when I go to fill out the Profile, the following circumstances can exist:
Profile for school year 2020-21
Prior prior year will be 2018
Potential gift from grandma will be in 2019.
Question on that year’s profile, for my son’s senior year, will be “Parent 2019 Income and Benefits”
I am trying to figure out if she does the gift in 2019, I think I would need to mention it in the answer for “Parent 2019 Income and Benefits”, even though the prior prior year will be 2018. That’s the case I am wondering how it affects financial aid.
Is the goal to maximize your aid, or to make college affordable, i.e. at the end of the day, if you lose a dollar in aid because you got a dollar’s gift from grandma, does it matter to your son???
I know a family that went through financial gymnastics to delay a grandparents gift so it wouldn’t impact aid. Guess what- grandma died, the will did NOT name the kid. Problem solved I guess… truth be told, in a family with more than one grandchild, I’d take the gift and say thank you very much. You have no idea what’s going to happen in two years, or how many other cousins are expecting a distribution to cover THEIR tuition.
Bird in the hand and all that. I’d encourage the gift now (assuming the grandparent can afford it) and have both the kid AND the parents write sweet and personal thank you notes.
Gift in the future? Good problem to have. Less aid because you have more family money? A GREAT problem to have!
I understand and appreciate the past two comments. To be honest, it is really grandma’s decision. From her point of view, she may think that her gift is really getting reduced (probably because that is what I have told her). I am in an odd situation here. Of course I appreciate the gift, but I actually advice her on her finances. She totally trusts me. Thumper’s idea of waiting till October 2019 can work. Just trying to understand if it’s necessary. At this point I am gathering information so that I can present the options to grandma.
So I decided to ask my son’s school directly. I called and at first they said the grandparent gift I am talking about above would not have an impact. Then I pressed a bit more about what was meant by no impact (does it mean no affect on my son’s financial aid) and she responded that it’s really up to their reading room (not familiar with that terminology here but I assume it means the people who read the application) to decide if it affects the aid. So I guess she really didn’t tell me anything. I think I’m just going to tell grandma that there may be some impact. If she still wants to do the gift, so be it. Otherwise, it won’t be a big deal.