<p>Hello,
I have been lurking here a while and it has been very helpful.
I have a situation that I have not seen addressed yet. </p>
<p>My wife received a large sum of money from her mother as a gift a couple of years ago. Her mother (my MIL) is handicapped, elderly, and receives more than half of her support from us other than social security. This money was given to us so that we could take care of her in her old age such as assisited living or nursing home expenses. </p>
<p>We are now realizing that this could potential screw us when it comes to applying for financial aid in a couple of years. If it were not for this lump of money, we would actually be sitting pretty good as far as EFC.</p>
<p>My question is how much will the financial aid offices look at this, is there any where on the FASFA to acount for this? Do they give any consideration to the fact that we might soon be facing a $50,000 a year nursing home bill in addition to school $$$?</p>
<p>I do realize that we should put everything we can into our retirement account (ROTH where we can get it out if needed), and to pay down our mortgage on our house, but what else can we do?</p>
<p>Thanks, </p>
<p>dj</p>
<p>You could anonymously talk to financial aid offices about your concern. My understanding is that with documentation, situations like you describe are taken into consideration by colleges.</p>
<p>I think colleges will look closely at a situation like this because it doesn't make much sense for grandma to have gifted you all of her money at once. You can only gift an individual $12K/yr, and that's now. Grandmas's planning should have assumed she would need care in the future. Frankly, it soulds like another attempt to hide money. </p>
<p>If she indeed gifted you the money, it's yours in the eyes of colleges. Her future care won't be considered. They will consider it if she has large bills for her care now.</p>
<p>Colleges will make adjustments based on loss of income, and large expenses such as medical (and probably nursing home ) costs incurred during the base year (for instance the tax year prior to the school year i.e. 2006 tax year for 2007/2008 school year). They cannot adjust the EFC but can adjust the figures input to FAFSA such as income. I don't think they make adjustments to assets.</p>
<p>To be honest I doubt that they will consider possible future expenses - after all we all might have to pay for a nursing home or might lose our jobs or might be hospitalised - until it actually happens I would be surprised if they would take it into account (after all even if you have several children with probable 'future' college costs you do not get any adjustment unless they are actually in college at the same time). If you provide more than 50% of her support you may be able to include her as a houselhold member and if nursing home expenses are actually being incurred then you may get an adjustment - but I think the assets will be regarded as being available for college. I'm not a financial aid specialist so the above is just my opinion - but is based on what I have read about financial aid and the sort of things they are willing to make adjustments for.</p>
<p>Consult an attorney to see if the funds can be placed in a trust that is to bve used only for Grandma's care. If you are paying her expenses out of current income, then you can still claim her as a dependent, but by getting ther funds out of your immediate access, it may be possible for it to not be counted for FA.</p>
<p>I am not an attorney, nor do I play one on TV.</p>
<p>
[quote]
Consult an attorney to see if the funds can be placed in a trust that is to bve used only for Grandma's care. If you are paying her expenses out of current income, then you can still claim her as a dependent, but by getting ther funds out of your immediate access, it may be possible for it to not be counted for FA
[/quote]
</p>
<p>There have been many postings (and much gnashing of teeth) on CC about how having money in a trust fund does not protect assets from financial aid. Finaid has information about it at:</p>
<p><a href="http://www.finaid.org/savings/tru****nds.phtml%5B/url%5D">http://www.finaid.org/savings/tru****nds.phtml</a></p>
<p>So be very cautious about this idea which could tie money up to where you cannot actually access it while at the same time affecting your EFC.</p>
<p>ok that link will not post because CC thinks I am cursing - where the asterixes are it is the words "trust funds" but with no space between the t and the f</p>
<p>Thanks for all the info. </p>
<p>I think the trust fund idea is too complicated for our situation. I have been talking with my "financial guy" who helps with IRA's insurance etc... (who luckily has kids going to college in a few years so takes a real interest in this ;) ).</p>
<p>It looks like niether the Elderlaw Attorney we worked with or myself looked far enough ahead when we did this to see the effects on the EFC.</p>
<p>It appears that our best option might be to put the money into a Universal Life Incurance plan that I have had for about 25 years. This was taken out before many of the rules were changed on these products in the late 80's. I would be able to put as much as I want in, but the amount of insurance must be adjusted too. This seems like it would work well financially (see below). My only question is does the "cash value" of life insurance ever count towards assets?</p>
<p>The $$$ of it are like this;</p>
<p>To put in 100K - have to buy 500K more insurance</p>
<p>5% upfront load, but it currently pays a 5.5% return after the cost of insurance, which compounds tax free until withdrawn.</p>
<p>Money is currently in CD's for liquidity if needs and saftey of principal @ 5% - about 4% after tax.</p>
<p>Money can be borrowed against the cash value at a net rate of about 2.5% - pretty cheap! Or cash vlaue can be taken out anytime with no load at all.</p>
<p>This means the "load" would be paid back after about 3 years, the money would be sheltered for EFC purposes, I would have 500K more insurance and a good source of cheap loans.</p>
<p>Doing this would put our EFC back at about $3500 instead of $16500, so quite a difference!</p>
<p>Where do any of you see the flaws in this plan? Its always good to have other views too!</p>
<p>thanks,</p>
<p>dj</p>
<p>I have not seen any school that asks about cash value insurance values, so that should be "safe" from financial aid.</p>
<p>If your policy is old enough, the new money in should not incur a surrender charge if you need to take it out, but the new $500k in death bene will result in some surrender charge if you take out the money early.</p>
<p>Policies before 1987 are much much more flexible than later ones, if you have one of the "good" ones from the early-mid 80s, it may work quite well for these purposes.</p>
<p>One thought, if an elder law person had gma gift you her assets, that is a plan to allow gma to be in the nursing home on the govt $, not a plan for you to pay it later. An older person with no assets can get subsideized nursing home care, the assets cannot have been transferred within 3 years of entry to the nursing home, but from the brief info provided, it sounds like the attorney has you protecting gma's assets from being assessed to pay for nursing home care.</p>
<p>The policy is one of the "good ones", very flexable. We are in the "3 year wait" right now. And after that point we are in an area where many nursing homes dont take medicaid, or if they do it is only a "partial pay" and we need to make up the difference, thus the reason for wanting to have something there as a supplement to help have quality care.</p>
<p>thanks,</p>
<p>djd</p>