<p>So many of the parents here seem to have good knowledge and advice to share that I'm turning here first... also because I don't have any idea where to find the answer to this question. I already submitted the CSS profile and just did the FAFSA worksheet on my daughter's behalf. It suddenly occurred to me, what does it mean to FAFSA and CSS if one holds title to an elderly parent's house in a Life Estate situation? My mother (84 and very healthy) transferred her assets to my brother and me about five years ago in a Life Estate, which is a very common practice. Although I don't have the right to tap the (substantial) equity in her house without her permission, it does show up on my credit report, along with a mortgage that she took out for my brother. Further, my own mortgage broker listed her house as an asset last year in order to help me refinance my own home. We have no savings or assets otherwise and I am fairly sure my daughter would qualify for aid based on my own situation, but mom's house would show up as a $600,000 asset if I had to report it. Other families must have dealt with this. Can anyone help? </p>
<p>Mom is very generous, by the way, but none of us have the income to pay off yet another mortgage in order to pay for college. </p>
<p>This is what the explanations section of the Profile was designed for. In all likelihood, Profile will require you to list this as an asset and then explain why it should not be included (should you receive such grace).</p>
<p>The FAFSA might be another matter however. I spoke with FAFSA a couple years ago regarding a similar situation involving a limited liability partnership. They instructed us not to list the LLP on the FAFSA because the parents had no control or access to the asset.</p>
<p>I will warn you however, talking to the people at FAFSA is a lot like talking to the people at the IRS. You can call 12 times, and ask the same question of 12 different people, and get 12 different answers.</p>
<p>Moral of the story, call FAFSA, if you get the answer you want, document it, hang up the phone, and don't call again. If you don't get the answer you want, try calling a couple more times.</p>
<p>This answer is given only slightly toungue in cheek.</p>
<p>see thread: Tips and/or Tricks to know about FAFSA. This forum.</p>
<p>The property is now your asset: Along with the resulting affect on FAFSA.</p>
<p>As I said in that thread, be sure that understand thoroughly the effects of asset shifting. You've bypass some tax and inheritance issues but assumed a new asset "basis," a nonliquid asset, and probably 100% EFC. </p>
<p>see someone professional for further details. </p>
<p>Thanks, both of you. I actually did read the tips and tricks thread first, then started this because I didn't see an analogous situation described there. CSS profile is already long gone, and I'm thinking now I won't list mom's house on FAFSA... for several reasons, among which it is not an asset over which I have any control or decision-making power or ability to "liquefy." I did consider calling FAFSA but suspected exactly what scottaa suggests would happen. </p>
<p>If anyone out there has the exact same situation, I'd welcome hearing how you handled it.</p>
<p>Amatricia, your question is too complex to be answered in a public forum. Also, I do not think that the FAFSA employees could be of much help. </p>
<p>For starters, you will have to have someone reviewing the exact terms of the "life estate." You described a situation where the transfer of the property already TOOK place. This may be inconsistent with other "life estate" situations where the transfer to the remainderman only takes place upon the death of the original owner. It also seem inconsistent that your "ownership" seems barred from inherent benefits, as you indicated that it was your mother who took out a mortgage for the benefit of your brother. </p>
<p>While it appears -on the surface- that you have a reportable asset since it is a second residence, the absence of true control and benefits might open the door to a different reporting for FAFSA or PROFILE purposes. One the tests relates to your ability to use the assets to pay for tuition, and it does not appear that you have the righ to sell or borrow against the property for YOUR benefit.</p>
<p>That's actually a very helpful analysis, xiggi. I don't know anything about how FAFSA determines what makes an asset usable, but it is true that I can't make any financial decisions about the property. Life estate is a pretty straightforward legal process leaving decision making to the original owner(s) until he/she/they die. So I think I have settled on an answer I feel comfortable with... thanks for helping me think it through.</p>
<p>Legal comment here:
If the title is held with a life estate to your mother, then passes to you -- you are not the owner. You become the owner when your mother dies - but you are not now the owner. </p>
<p>The only thing I would caution is to make sure that all the paperwork establishing the life estate is properly drawn and recorded -- the term "life estate" has a very particular legal meaning.</p>
<p>Thanks, calmom. Mom's lawyer is excellent, but I'll take another look at the paperwork. Just to be sure. I do recall the lawyer explaining life estate to us as you have, which I think is why it never occurred to me that it might be an issue until I read that FAFSA worksheet language and panicked a bit.</p>