<p>We have 2 kids going to college this year. One will be second year in fall 2013 and the other a freshman. My FIL passed away this past fall and his life insurance policy just came in. So, we have some cash sitting in our accounts and would like to use it wisely (plenty of things that need to be paid and done with it). The freshmans FAFSA needs to be in very soon though. We are looking at about $12K. We need that money to fix our roof this spring and pay some extra bills throughout the year, so we were hoping to hang onto it and use it when we get to that point. The money is "spent", but not at this date IYKWIM. What would you do in this situation. </p>
<p>The calculators are showing that with 2 in this year we will have an EFC of $7K+ on each of them. With one child in college last year, we had and EFC of $1K. My husband was on mandatory overtime for a good chunk of 2012 and that put us into the category of counting our assets, whereas last year we were just under 50K and assets did not count. My DH's grandparents left him and his brother their farmland(110 acres) when they died. That is our retirement, as we do not really have much in retirement accounts. How much differently does that farmland figure into it as to IRAs?</p>
<p>Last question. Where exactly do you list which assets and what are all of the things that would fall into that category to be listed. Does it matter which you put it under. We do get some rental income from the farmland, does that make it an investment farm as to real estate? Saving bonds given to the kids as children(which I have heard are not worth what they say they are)? Cars? Savings? Retirement accounts? Is there something we should be doing differently this next year. We will probably make right around $50K for a family of 6. The farm land is not cash on hand, but seems to count as such. Do we loan against it and pay everything else off, including our home? Do we just swallow and go on.</p>
<p>If the insurance money came in this year, you won’t report it on FAFSA until a year from now. FAFSA required information only from the previous year. That determines financial things for schooling from Fall of the year you fill it out through the next Summer.
If you need the money to fix the roof and pay bills, do just that, because you said you “need” to.
I’m not qualified to answer your other questions, except I hope you are certain the farm land actually can be used for your retirement. If land values plummet, will it still be enough? Will your BIL sell when you need to sell? When you need to sell, will there be a buyer or will you have no money for a few years until someone buys it?
Retirement money is more important than college money. Your kids can go to cheaper colleges, work, get loans, and get scholarships and grants. You can’t do any of that in retirement.</p>
<p>Income info is from 2012 but asset info is as of the date of submitting the fafsa. Generally life insurance proceeds aren’t income but if sitting in an account they are assets. They will be counted toward your efc at about 5.6% since it sounds like your other assets total above the asset protection allowance.</p>
<p>The farmland is an asset as well; report the value of what you could get for a fast sale, divided by two if it’s half owned by your husband. Getting rental income makes it an investment; the rental income probably already shows up on your taxes anyway, doesn’t it?</p>
<p>The value of cars are not reported on FAFSA. Qualified retirement plans such as IRAs and 401ks are not reported either.</p>
<p>Have an appraiser tell you what the farmland would be woth in a forced sale. That is, you’d have to go to court and force the BIL to sell also. It will be much less than the value of the land if both parties were willing to sell. </p>
<p>We had a similar situation with a homeowner’s loss the year before our kids started college. We got a lot of money for the property loss into our checking account, many times more than what is usually there. Fortunately we were able to have the repair work done before the reporting date for the FAFSA, so the ‘windfall’ was gone.</p>
<p>Yes, life insurance not needed to be reported as income, but cash as an asset right now. Also the farm rent is reported as income each year. We have seldom made enough to put away in IRAs, and the only reason we have the farmland is because it was inherited. It is not exactly “fluid”. This is why it will be our retirement. The county assessor just told me this morning that farmland is going up 50% in value next year! That isn’t going to help us. As far as selling, the capital gains would be pretty big I would think.</p>
<p>Thank you! I just called an they directed me back to the college. The college financial aid office, which I seem to be speaking to daily lately, said that I am to put down the amount that we would sell it to the other owner(it is family) for. I asked what do I use to verify that amount and she said they can’t verify it, they just have to take our word for it. I am not sure if that is the way you do it for all property, but that makes a big difference, because we would sell it to them for less to keep it in the family.</p>
<p>Property doesn’t magically increase in real value by 50% from one year to the next. The assessed value is likely different than the fair market value. The county assessor could be saying that in your county, land designated as agricultural use has historically been assessed at very low rates, but that next year, that rate will increase 50%. (Again, assessed value is not necessarily related the fair market value).</p>
Do the roof now and get the money out of your account. Unless it is covered in snow, there shouldn’t be a problem.</p>
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Some of the formulas make no sense at the edge conditions, and this is one of them. In this case one extra dollar of income can increase your EFC by $13,000. </p>
<p>It stinks, but that’s the rules. If you are going to be right around $50K, do some planning to keep it under.</p>
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This can be an effective strategy to lower your EFC, since home equity doesn’t count as an asset, and you get no consideration for other debts. So lowering the equity in another asset to pay down your mortgage and other debt can be effective. Don’t let the tail wag the dog though, you have to look at your entire financial picture.</p>