<p>My family is in a rather lower bracket on the income scale, but we recently got a rather large sum of inheritance money from my grandparents, and I was wondering if anyone knew what effect this would have on financial aid (I'm entering my senior year of high school). As it stands, my father has made about 5,000 $ this year, which would qualify me for quite a bit of aid. If we have to count the 80,000 $ inheritance as income, however, I would qualify for significantly less. The check has not been cashed yet; my mother was wary of that action for the aforementioned reason. Does anyone know how FAFSA would regard my situation? Advice is sincerely welcome! Thanks!</p>
<p>You can supply information that this is a one time lump sum, not income. It will likely be treated as savings and a portion of it will be expected to be used for college.</p>
<p>Just an FYI...this savings should be in the PARENTS name not the student's. The expectation is that 35% of student savings will be used for college expenses. I believe for parent savings it is only 5%. That is a huge difference. Inheritance money is treated as savings. We had this happen a couple of years ago. It is NOT income.</p>
<p>Generally, property you receive as a gift, bequest, or inheritance is not considered income for IRS purposes. However, if property you receive by gift, bequest, or inheritance later produces income such as interest, dividends, or rents, that income is taxable and would have to be reported to IRS. </p>
<p>As to FAFSA, your familys EFC (expected family contribution) is derived from four factors: parents income, students income, parents assets, students assets. Look for the line on any 1040 form: Adjusted Gross Income (AGI). If your parents income is beneath $50000 and your parents file a short form (1040A or 1040EZ), then two of the above factors (parents assets and student assets) will be excluded when your EFC is determined. This is called the simple needs test. Since you indicate that your father has only made $5000 this year and its almost the end of July, I am assuming that during the rest of this year that your parents taxable income and hence their AGI will not exceed $45000, Im pretty sure that the inheritance money will be excluded when FAFSA determines your EFC (simple needs test).</p>
<p>In addition, if your parents AGI ends up below $15000 and they file a short federal tax income return (1040A or 1040EZ), or if your parents dont file a tax return and have combined income from work of less than $15000, then your EFC is automatically set to zero. If your parent's meet either of the above two scenarios, your EFC will be automatically set to zero even if you have lots of income and/or assets</p>
<p>If this kind of inheritance happened to me , I would put it it in an IRA for each parent right away ( depending on their age , up to $4000.00 each , I think ) so that would not count on the FAFSA .</p>
<p>Just a seuggestion .</p>