<p>I am looking for assistance with the following inquiries:
1. If a parent has an inherited IRA is this part of their "savings" or not for FAFSA reporting purposes?</p>
<p>Is this an IRA inherited from a spouse, or from someone else? The rules are different depending on who the beneficiary is. I’m also assuming this isn’t a Roth IRA.</p>
<p>For non-spouse inherited IRAs, the beneficiary must include any IRA distributions in his taxable gross income. The distributions are taxable and must be distributed according to IRA rules (by the 5th year of the original owner’s death, or over the life of the benficiary). Distribution is mandatory and so will increase the beneficiary’s AGI (–> will increase FAFSA EFC). These IRAs cannot be treated the same as an IRA you’ve opened on your own. You can’t roll your own money into it, and you can’t make additional contributions. </p>
<p>A web search has turned up the statement that since an IRA (any IRA) is a retirement account, it is not a reportable asset on FAFSA. That seems the most favorable treatment; maybe you could call the FAFSA help desk and ask them?</p>
<p>Digging a little deeper, it seems to me that whether the funds are considered assets by FAFSA would depend on how the inherited IRA is titled. If the IRA is now in the name of the beneficiary, it might be an asset and reportable as savings on FAFSA. If you’ve established a “beneficiary IRA” to move the money into, this keeps the money in the name of the person it used to belong to, with you as the the beneficiary. You’d have control of it and can manage how it is invested during the distribution phase. In this case, since it’s not money in your name, it seems like it wouldn’t be a reportable asset on FAFSA.</p>
<p>The distributions are income. But the balance in the inherited IRA is not considered as an asset…just like any other IRA or TSA. When I inherited my mom’s IRA, I was required to take a minimum annual distribution because my mom had been required to do so. That distribution was included as income. BUT the balance of the IRA was not an asset. </p>
<p>Mine was bequeathed to me as an IRA and I chose to leave it as an IRA. If I had moved it to a savings, it would have been an asset. It never left the “IRA domain”.</p>