I have seen a few threads about this question but I still don’t know how to answer it. Let me start out by mentioning a few things about my situation:
- I manage my mother’s money for her.
- My mother started gifting money to me last year (total $14K). This was her request.
- She also gives various small gifts ($100 for birthday, buy dinner when together, etc)
- Last year I took the $14K and paid off a HELOC
- Money between my mother and myself flow freely. For example, I bought her a cell phone and put her on my plan. She insisted on paying for it, so she wrote me a check for the cost of the phone and 2 years worth of bills for it.
- My son is starting college fall 2016
I’m not really sure what my son should put down for PI-230A. I was thinking the $14K seems appropriate. However, I have seen some say if the amount shows up as an asset elsewhere in the application, then you don’t need to enter it here. By increasing the equity in my house (by paying off the HELOC), it does show up. I’m guessing the small amounts are not really necessary to enter because it would be very difficult to keep all such records (although that is not really a defense). Then there’s the issue of the phone, where she wrote me a check for around $2K. Should that be part of this?
Thanks for any input. This is my first time posting. I find this website full of very valuable information.
Which school(s) on your S’s list require(s) this information on their CSS Profile? Perhaps you can contact a FA advisor to describe your situation.
In my mind, the issue is the schools rightly want to know what type of income might be recurring, and what is not. Since there is usually a place to add your comments/explanation of some of these items, I would probably recommend showing the full $16,100 - I would probably not include any of the amounts for dinners, etc.
PI-230A is a standard Profile question, so all schools that use Profile would require this information. (At least I think so. If Profile uses skip logic like the online FAFSA, someone please let me know.)
OP: Based on the facts that you present, I agree with you that $14k seems appropriate. The $2k for the cell phone I would consider a reimbursement, even though a large part of it was payment in advance for the monthly service. I wouldn’t worry about the small gifts, unless there are a lot of them and you have documentation. And just because income or a gift has turned into a reportable asset doesn’t mean that you don’t also report it as income or a gift.
Anyone know if gifted money to a parent reported as income is treated just like other income on the CSS profile? In other words, will a $14K gift cost me about 46% of that in aid (clearly not what was intended when the gist was made)?
Are you saying that parent income is assessed at 46%? That seems high. In any event, colleges that use Profile are not bound to a standard formula or set of rules on how various categories of income and assets are treated. They look at the information provided and make their own independent determination. Sure, many things may be treated the same over a wide range of schools, but unless you know for certain how a specific Profile school calculates aid, you can only make an educated guess about how changes in your family’s financial situation will effect institutional aid.
I think 46% is the max rate. Not sure how to calculate the parent income rate.
I have a couple followup questions if anyone knows.
My mother is thinking of buying us a car. Not a new car, but will probably be in the $10-15K range. Would that amount also be added to PI-230A? I would think it may because of term in the question “any money paid on their behalf (e.g., bills)”, but it’s not really a bill. In general, items like cars are excluded as an asset.
My mother is at a point in her life where she wants to help us out here and there as she wants. She always says that she’d rather see the fruits of her labor work for us while she is alive. She’s not rich, but she’s done ok. I hope one day I can help my kids out like she has helped me out. However, it seems these gifts could really hurt my child’s financial aid. Anyone have any suggestions on how to structure such gifts in the future. I have seen some suggest doing it as a loan. However, that seems like a hassle for my mother.
Why doesn’t your mother contribute to your kid’s college costs? Why doesn’t she start a 529 for the kid?
Anything your mother gives you or your son from 2018 on (the spring of your son’s sophomore year) will not be reported as income on financial aid forms, assuming your son completes college in four years. So if she wants to help out, tell her it’s advantageous for financial aid purposes for her to wait until your son’s first year and-a-half is done.
But if grandma starts a 529, wouldn’t this be as good…or better?
She could certainly start saving in a 529 now, and wait until 2018 to make any distributions, at which point there would be no FA implications (again, assuming the student finishes in four years). So yes, I think this would be a good strategy, given the tax free 529 growth if the distributions are used for qualified education expenses.
Thanks. Interesting. To make sure i got it right - if grandma opens a 529 and she’s the owner, then the asset does not count for financial aid. As long as withdrawals are made a year in a half into college, the withdrawals won’t be considered income for any of the 4 years of college. Is that all right? BTW - I live in NY if that’s a factor. I looked on NYs 529 website and I believe grandparents can be owners.
How about if my son decides to go to grad school? I assume that would affect this plan.
Anyone have input on the car question from this year - would it be reported under PI-230A and therefore be considered income?
Thanks for the input
Yes, you have it right. A grandparent-owned 529 is not an asset reported on FAFSA, and if distributions are not made before spring of sophomore year, they will not be reported as untaxed income to the student.
Pretty much anyone with a social security number can open a 529.
Grad students are considered independent for financial aid purposes, so that will have to be factored into the equation.
Interesting but some schools ask about your cars, it was on our profile last year. Maybe just out it in the notes, not on an income line.
I suspect the Profile schools that ask about cars represent a small minority.
The Profile (and FAFSA) is going to use the tax year of “prior prior” starting next year. Are questions like PI-230A, amount of cash your parents received, going to ask about “prior prior” or just the prior year?
There were several Profile schools that wanted the information about our cars - the FA officer at one of them explained to us that they wanted to make sure Timmy didn’t hide assets by buying a couple of DeLoreans or other collectible cars.
It seems to me that if you’re smart enough to be a competitive candidate for these schools that give great aid, they figure you may also be smart enough to figure out any loopholes in how they calculate aid.
I’ve heard of the collectible car rationale as well, but there are plenty of other things that aren’t asked about on Profile or school add-on questions that would work just as well: art, antiques, jewelry, watches, comics, baseball cards, firearms, etc.
The more I think about it, the more I like the idea of my mother opening a 529 plan and using that account for any gift money in the future. Not only does she get the benefits mentioned above (No counted anywhere for financial aid as an asset, counted as income when withdrawn can be mitigated by doing it late in the college process), but she would also get a state tax deduction on part of the contributions in my state. So I think I have a plan going forward. I appreciate the suggestion.
That leaves me with what to do for this year’s Profile (and the following year with the change). I mentioned the car as a hypothetical above, but it actually happened already. So I have two sources of gift money this year: 1) $14K given to me pay down my HELOC; 2) $14K given to me to buy a car.
For (1), even though the money is part of my assets (equity in the house is greater after paying off HELOC), it seems an opinion above is to include it in PI-230A. I have seen some other comments in other threads say that since the question says “Don’t include child support or any other amounts reported elsewhere on this application”, then perhaps you don’t need to report such gifts in PI-230A. I even asked a college adviser person and they said it is a bit of gray area. Still not sure what to do here.
For (2), although the car will be mentioned elsewhere in the additional questions, in general I don’t believe people would include tangible gifts in PI-230A. There may be some ambiguity since the money was given to me to buy the car. I was thinking of just mentioning the car gift in the write-in section. However, I also don’t want to bring attention to it.
Thanks for the comments so far. If anyone has anything else to add, I would appreciate it.