<p>I am a parent completing the FAFSA for the first time for our oldest daughter. My mother recently transferred her home and farm to me through a deed transfer. However, she has maintained life estate rights to the property. She also receives all income from the farm (rental and gas royalties).</p>
<p>Since my rights to this asset are limited (I cannot sell the property), do I have to count this as an asset on the FAFSA? If so, where?</p>
<p>Why can’t you sell the property? Somebody might want to buy it subject to the life estate.</p>
<p>DT is right, you can sell it. The buyer would simply be subject to the life estate stipulations.</p>
<p>So, then check with a local realtor and find out what you could sell that for. I am not sure there is much market to buy RE and not receive rent or any other income, so it seems like the value could be low unless there are amazing future rights & royalties</p>
<p>You can also borrow against it, so it’s definitely an asset. You might ask schools for professional judgment once your child gets into colleges where they look at the whole situation. Some may lower the value based on the circumstances.</p>
<p>I found this thread searching for information on life estates and fafsa. However, as with all internet information the comments lead one down the wrong path.</p>
<p>The life estate allows the person to retain ownership until the moment of death. Therefore the lady does not own the house at all and the life estate really has no value. In order to sell the property both the owner (of the life estate) and the remainder interest person have to agree. Once the property is sold the whole money goes to the owner. Most likely it will also go to the owners debts as many people use life estates to circumvent loss of a family home when one many end up in a nursing home on medicaid. </p>
<p>If money is borrowed on the property both parties have to agree on the loan. I borrowed money on my fathers property so that I could put a garage on his house. I pay the loan but we both had to agree. I guess essentially he put up his property so that I could borrow money to add the garage. Your life estate deed or agreement usually dictates the responsibilities. For example the person retaining life estate is responsible for all maintenance of the property but any improvements are the responsibility of the remainderman. </p>
<p>The place I am in is that I am living in my fathers house now - as a guest - while he is in a nursing home. I have to do a fafsa for this year and don’t really know how to account for the mortgage on the home. I still have my original home and will keep it til my father passes. I also had to purchase the remainder interest in my fathers property to meet medicaid rules. You see you cannot get medicaid in NY state if you have given away property within three (now 5) years. You have to get that property back. The way around the three year rule is to buy the remainder interest from the family member (or anyone else for that matter). Hope this clears things up for anyone else having this issue. In my case the fafsa is kind of a waste since my wife and I have a combined low 6 figure income. Still barely getting by as we had about half that just 5 years ago…</p>
<p>Talk to an attorney for correct advice but be sure he is trained in estate planning. And knows your state laws in that case.</p>
<p>^ The attorney would also have to be well versed in College Planning. Many estate planners and financial advisors have given bad recommendations because they don’t know the details of FAFSA or the CSS Profile.</p>
<p>That’s a lot of information, spuddy, but boiled down are you saying the remainder interest is not an asset that has to be declared on FAFSA?</p>
<p>I responded to Spuddy’s post about this in the Parents Forum.</p>
<p>I wonder if the FAFSA folks treat these “life estates” like they treat “trusts”. In the trust situation, it does NOT matter at all if you have ACCESS to funds through the trust AT ALL…it matters that you are a beneficiary of the trust. If you are a beneficiary of a trust REGARDLESS OF YOUR ACCESS TO IT FOR FINANCIAL PURPOSES, you must list YOUR share of the value of it on the FAFSA form as an asset.</p>
<p>As rough as this sounds, this IS an asset for you and you can borrow against its value.</p>
<p>In Booneg’s case, the home is IN her name. The deed has her name on it. Therefore it is HERS…but her mom retains the rights to it until death. Check with an attorney but that is how I’m reading what she posted. The deed is in Booneg’s name.</p>
<p>Spuddy, your situation is a little different. You are LIVING in the house…thus it’s your primary residence, I would think (hope one of the finaid folks will check in on this one). That would make your OTHER house an asset for financial aid purposes…I would think…but I could be wrong on this. </p>
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<p>Spuddy…if you’ve purchased the remainder interest…then the property is YOURS. You can’t have your father own it for college financial aid purposes AND have YOU own it for Medicaid purposes. Can’t have it both ways.</p>
<p>Regardless…you have two pieces of real estate…one is your primary residence (which is NOT reported on the FAFSA) and the other is another piece of real estate (which IS reported on the FAFSA). Both would be reported on the CSS Profile.</p>
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<p>Exactly.</p>
<p>This property has to be available for either your father’s medical care or your child’s education.</p>
<p>The medicaid rules are written so that those with assets are not using government money while having significant assets that should be tapped first. If the property now belongs to you and not your father, than it is only fair that it should be available (or seen as potentially available) to pay for a child’s education.</p>