<p>My elderly father recently told me that my portion of his will, will be about $50,000. I would like to take that disbursement after both my children are through college, when I turn 55 years old. I don't mind having no access to the funds. Is there a legal and ethical way of doing this, without it showing up on a FAFSA (because it wouldn't be available as funding for college).</p>
<p>Since he’s still alive it isn’t yours yet so you don’t have to claim it. Not sure though on what happens or how to have it listed should the awful happen and you inherit it while your kids are still in school though but you would have asset protection so they wouldn’t assume all the $50K was available unless that is in addition to other large assets.</p>
<p>If the money is in a retirement account, you may have the option of rolling it over into a “Beneficiary IRA”. You would need to take minimum withdrawals every year based on your age, but the bulk of it would be invisible to FAFSA because it would be classified as a retirement account. Once the kids were out of school, you could withdraw as much as you wanted in any given year.</p>
<p>If it is a retirement account that can’t be rolled into a Beneficiary IRA, or if it is an insurance policy you may have the option of leaving it “unclaimed” for a certain period of time, or to take partial payments each year for several years. You would need to find out just what the options are from the insurance or investment company that holds it.</p>
<p>If he is talking about the general estate (cash from the sale of the home, etc., etc.) chances are that it could take a year or more before you saw any of that money. My mother’s relatively simple estate wasn’t completely cleared for more than two years. Depending on who is the executor, you may be able to arrange to have the paperwork for the estate to take as long as you need it to. This would be something that you need to check with a lawyer practicing in the state where the will will be probated.</p>
<p>I don’t know anything about setting up a trust. That might tie the money up pretty well too. But, again, look around for some more expert advice on that issue.</p>
<p>Putting the money into an annuity would hide it from FAFSA, although it would could show as income in the year you receive it (inherited money/property usually appears as income, insurance settlements normally don’t). Annuities can be tricky investments, so you definitely need expert advice before going that route. If you aren’t currently maxing out your 401(k) and IRA deposits each year, you could do so the year you receive the money. Again, it will show up in year one as income, but after that it will be hidden away in the retirement account.</p>
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<p>Until your father dies, this money isn’t yours. I would talk to someone about how to set this up PRIOR to his death. Otherwise, the inheritance will be an asset of yours and will be considered in the financial aid equation.</p>
<p>I’m so grateful for such quick and thoughtful replies. Thank you, all. HappyMom, your reply was especially helpful. Yes, it would be in the form of the sale of a house, an older sister is the executor, and there is a lawyer who has already set this up with my Dad that I can talk to. I understand how the annuity idea would shelter that income after Year One, and I think you’re saying that I could contribute more to my retirement or even open a separate IRA to lower my employment income to balance out the inheritance.</p>
<p>The best news, ironically, was how long it takes in probate! Obviously I hope my Dad lives to 100, but if not, I’ll make sure to drag my feet throughout the process. Thanks again!</p>
<p>^^^</p>
<p>It’s best to try to avoid probate …that can eat up assets in legal fees and court costs (ask me how I know… 
). If the estate is worth a decent amount, then your dad should have Living Trust to avoid probate.</p>
<p>I don’t know how the rules work here but in the UK it can take a while even if it does not go to court. My stepmother (actually they were separated for over 2 years but he had not signed the new will he was in the process of doing so the old one stood) was executor of my Dad’s will and took 2 years to complete processing my fathers estate.</p>
<p>I don’t know it there is a time frame in which things have to be completed or if you can slow them down a bit.</p>
<p>If the event happens and you do receive the 50,000 as income, not much can be done as was stated before. In following years,an asset is taxed at about 6% for college aid. If you would use the money to pay off debt [personal debt not business],it completely disappears from FASFA.
One thing you can do to avoid assets being declared is to cycle yearly debts like property taxes and insurance to be paid right before FAFSA is reported. I know a farmer who prepays his seed,fertilizer,and other inputs in February. It is a common practice for farmers to do this to get a better price from suppliers so it is a clean deduction in declared assets.Six percent is nothing to sneeze at when the amounts are high enough.
I wish you father many more years…</p>
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Attorney here. </p>
<p>This is a state by state issue - in some states, trusts make sense but in some, they don’t really save money. It is not right to generalize in this area. That said, if your father decides to do a living trust, the provisions of that trust could delay any distribution to you.</p>
<p>That said, $50K in additional assets (it is not classified as income) is probably not enough to worry about when it comes to financial aid. As has already been noted, 6% of the asset would go to the EFC so we’re talking about a $3K increase. But remember that until you actually inherit the money, there’s nothing to report.</p>
<p>Putting aside the moral question - is it really right to try to hide this money - if you use the money to pay down debt, it simply disappears for FAFSA purposes. If you want the money to disappear temporarily and you have a home equity line of credit, you can pay down that line and then, if you need the money in the future, it’s there. But if you take this approach, keep in mind that your home equity line may expire prior to the end of college for your child.</p>
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<p>or the bank can simply rescind the HELOC (see post on this topic from this morning). If you’ve got a HELOC that you’ve pulled money from, it might be worth keeping that money as cash rather than paying down the HELOC and assuming the funds will be available again.</p>
<p>Again, I can’t thank this community enough for your thoughtful responses. Slumlord, that’s an excellent and easy suggestion, cycling the billing for property taxes, etc… Speihei, very helpful to have an attorney’s feedback. If I go forward I’ll talk to my Dad’s lawyer (Massachusetts), and thanks for pointing out the relatively small impact of the inheritance. Vballmom, I’ll be sure to check out that link.</p>
<p>Let him live to 103!</p>