<p>My brother and I own our mom's house and she has a life estate. She's 90 but still lives there on her own. A couple of months ago I proposed buying out my brother because I'd like to move back "home" when I retire sometime in the next 4 years. He said he'd think about it and we left it alone. </p>
<p>My brother is now at the point of filling out the FAFSA for the first time and has been told by a consultant that it would have been better for him if he wasn't part-owner of mom's house. He also doesn't want money from me right away because it may diminish his daughter's chances of getting financial aid. </p>
<p>SO - a few questions. </p>
<p>If he signed a Quit Claim deed now and relinquished his interest in the house, would that affect the FAFSA? </p>
<p>If we drew up some sort of contract so that I would pay him years later for his interest in the house, would that help his FAFSA situation?</p>
<p>Reality check: I think in a year when he finds that the FAFSA says that they'll only qualify for loans, he'll be happy to have me start to buy him out sooner rather than later.</p>
<p>Your brother is being short sighted. He needs to run the net price calculator without the figures for the house. This will give him a good estimate for potential need based aid.</p>
<p>The reality is that need based aid is weighted heavily towards income. If your brother has sufficient income, it is very possible that he is doing financial gymnastics for no reason.</p>
<p>If his income is in the over $100,000 range, his kid is not applying to the uber generous colleges, or if she is applying to schools that don’t meet full need, this really could be a waste of his time.</p>
<p>I’m not sure a sale transaction would help your brother much, if at all. If he sells his interest in the house to you this year with a contract that says you’ll pay him several years down the road, he has just swapped one non-liquid asset (50% remainder interest in house subject to mom’s life estate) for a another non-liquid asset (the note, i.e., your promise to pay) of equal value. He’ll have to report that sale as a capital gain transaction on his 2013 tax return, albeit on an installment sale basis which will defer the gain. If you are going to do this at all, get legal and tax advice.</p>
<p>While his wife does not work outside the home, his income is definitely over $100K - probably approaching $200K. My niece has been accepted at a pricey out of state school. He will have both kids in college in a couple of years. I think he’ll reconsider my offer.</p>
<p>Back in 2004 I was shocked to find ,as a result of the FAFSA, that I was expected to contribute $50K/year for my daughter’s in-state, public university, education. Right. I am a high school teacher! That was the only year I filled out the FAFSA. It wasn’t worth the time and effort to only be told we qualified for loans. No thank you. I paid for her education - BA and MA degrees - and she is debt free.</p>
<p>Yes - it will all be done right. I plan to get in touch with the attorney who drew up the life estate…8 years ago? and see what we can do that is fair to all of us.</p>
<p>If his income approaches $200,000, the asset won’t really make a difference when it comes to need based aid.</p>
<p>Again…have him run the Net Price Calculator for that OOS public university. Have him do this without listing the house as an asset. My guess is his family contribution will well exceed the cost of attendance.</p>
<p>In addition, the only public universities that meet full need for ALL accepted students are University of Virginia and University of North Carolina Chapel Hill. Neither of those schools,has sent out acceptances yet. So…it is very possible that your niece has been accepts to an OOS public university that doesn’t meet full need anyway.</p>
<p>If she was accepted last year…did she get a finaid package then? If so, what was their family contribution? If she was a full pay student, even selling the property will likely NOT net her significant aid beyond the Direct Loan.</p>