BelknapPoint, no offense taken considering you’re spending your time trying to help me out. I feel my statement is without contradiction, unless I’m missing the forest for the trees:
We = my wife and myself.
We don’t have $24k in a bank or in savings or stock or CDs or mutual funds, etc. = anywhere else.
The property does not belong to either of us. It belongs to the kids. I don’t have access to the proceeds from the rent, or the sale of the land.
The income is not much in the scheme of things - maybe up to $600 or $700 total per year and possibly half that some years.
There’s also the not-so-small problem that HALF of this belongs to my son who appreciates the little farm.
Evergreen5 - it’s worked out via lawyers and accountants. I trust my dad do whatever it is he feels he needs to do with the land. I stay out of the mess. All I know is my dad will give the shirt off his back to anyone and he’s more than a little frustrated how this has backfired.
Mom22039, I am under the impression I have to pay room and board, books, food (is that board?), – anything not tuition-related. I need to get in contact with Auburn on that question.
Having an EFC of $24k does not mean the school thinks you have $24k in an account somewhere. Part of the EFC can come from future earnings and even adjustments to your family budget.
EFC is expected family contribution, meaning that the student is part of the equation. Therefore, the term “we” when discussing who is responsible for covering college expenses usually includes the student. In your daughter’s case, I would say that this is especially true, since her EFC is likely considerably higher due to the real property asset that is partly owned by her. She is partly responsible for funding her college education. If one of your father’s intentions in gifting the land to her and her brother was to help with college costs, then it seems only reasonable to use the land for that purpose, either by using the income it generates or by going as far as selling it, if you and your wife cannot on your own pay the cost of her education after scholarships, grants and loans are applied.
First of all, if your kids own the property jointly and it generates on average $500 a year divided by two, then stop worrying about the impact of the income on financial aid. It’s negligible regardless.
Second, you are not obligated to have your D attend Auburn if you can’t afford it. I’m assuming that your D is a rising senior, yes? Sorry if I missed that. If so, you now can run the NPC’s (Net price calculators) on a wide variety of colleges to see what it’s going to cost you (you meaning you and your wife and your D in terms of savings, earnings, loans, a job, ). Anything that’s out of reach- you toss it.
Nobody is going to force your D to go to Auburn if you don’t have the money to pay the family’s share. I think people are pointing out that if your D is half owner of an asset which is worth more to her (and her brother) if they sell than by keeping it… it might be time to sit down and discuss a sale. And if this is off the table, and you can’t afford Auburn, then time to find a cheaper option. But owning an asset which throws off $250 or $300 a year after tax which could net each of your kids 40K (i.e. an extra 10K per year in available cash for college)- to me, that’s a family meeting worth having.
But before you do that- check your math and the logic on the form you filled out. It’s easy to make mistakes (even a decimal point in the wrong place, or putting a child’s savings on the wrong line) which will throw all the math off terribly.
Ok…so if your daughter has to list this asset as $40,000 in value, it will add about $2000 to her calculated family contribution. If she has to list $80,000 it will add $4000 to her family contribution.
But really…Auburn does not guarantee to meet full need anyway. So all younare guaranteed to receive is a $5500 Direct Loan.
Now…if you are low income…and this $2000 or $4000 added to your EFC would prevent you from getting a Pell Grant…that is one thing. But it doesn’t sound like that is the case.
Your EFC is $24,000 so aren’t going to get additional need based aid from Auburn.
In the greater scheme of things, is the property causing much harm (limiting scope to just the D and just Auburn) to the bottom line? Someone correct my math and assumptions…
Someone said Auburn COA is 24k.
The EFC was 24k (I’m assuming with 40k worth of property on it)
Isn’t the value 0.2 of student assets counted against the EFC? So their EFC without the property would be ~16k?
Once the merit scholarship (8k?) comes off then the cost is 16k.
With an EFC of either 24k or 16k, they weren’t getting aid (for this kid, this school, this year). The property didn’t cause the issue.
(Of course things would be different with 2 kids in school at the same time, or for the S who may not get the merit aid.)
Of course. However, property ownership includes responsibilities and possible tax consequences. The children, who are becoming adults, deserve to know a few more details that need not be shrouded with vague reference to lawyers and accountants. It might be that a quick phone call would clear up your understanding of the legal and tax implications, at the very least so that you may fill out the financial aid forms correctly.
If you are trying not to trouble anyone, the first thing I would do is google the county recorder’s office to see the owner of record (and look at documents, e.g. a quit claim deed or sale, which may be viewed online if it is a recent transaction). There is usually a link for doing a property search by address. From the same website, it’s also usually possible to see the property tax payments. If for some reason the transfer never actually happened, that would make all this easier; I’d want to see it with my own eyes.
I don’t think ascertaining the legal, tax and financial status of a piece of property owned by one’s minor children can be called “troubling anyone”. Nor is it a mess, and you don’t need a PhD in finance to understand the ramifications of keeping the property as is, selling it, borrowing against it, etc. It’s a piece of farmland, not a sacred burial ground. If there are better uses for the asset than your kids keeping it and netting a few hundred dollars a year from it, don’t they deserve to understand what their options are?
I’ve got friends who have kept a vacation property in the family well beyond when they should have sold it (at a profit, enough to make a meaningful difference for some of the original owners great-grandchildren’s education). It causes no end of strife, there are cousins who think it’s their ancestral homeland (it’s a cottage in a high property tax area) and others who think they should be putting it up on Air BnB at a minimum, even if others don’t want to sell. But since virtually every member of the family could do something more productive with the asset than keeping it tied up in a house that nobody can afford to visit more than once a year, why they at LEAST don’t call a family meeting to review their options is a mystery.
But they are happy to complain that owning it is keeping their kids from getting financial aid.
Get the book “Saving the Family Cottage”. It explains lots of ways to preserve real estate in families. I wish we had seen it prior to the trust set up on our family.
Perhaps it’s not too late to figure out how this farmland can best be put to use…financially…for the owners.
Her 40k in assets, at 20%, would be 8k/year, no? That would be her cost for owning a 40k share. Each year.
Calmom. We don’t know, but couldn’t there be an entity or LP that allows grandpa to manage this on her behalf, file taxes, etc, without D getting paperwork?
Whatever entity there was would require paperwork and corresponding tax filings. So maybe the owner kids would get a K1 rather than a 1099 … but there should be something.
There wouldn’t necessarily be a 1099 if the total rent was $500 or $250 per owner. That definitely won’t trigger income taxes for a teenager and the property tax would be a deduction against the rental revenue.
OP, run the FASFA EFC and Auburn NPC without the land. I expect you are still at zero aid as others have said. It won’t help you pay for college but will take a burden off your Dad that he didn’t hurt his granddaughter.
Yes…20% of $40,000 would be $8000 added to the EFC. Yikes! What was I thinking???
But to the OP. If your EFC is at the cost of attendance for the school…you won’t get any need based aid…except a loan.
And again…Auburn doesn’t meet full need anyway…so all you might have gotten anyway…is a loan.
This land ownership issue sounds like it’s a non-issue for Auburn in terms of how it affects financial aid. But that doesn’t mean you shouldn’t resolve this ownership issue.
Who would issue this 1099? Not the person leasing the property. Not the person with a life estate as it is his property to use until he dies. He can rent it out or he can let it sit. I think in this situation the grandfather is ‘earning’ the rent, and gifting it to a college savings account for the grandchildren. It’s between him and the IRS if this is correct.
If the grandfather doesn’t have a life estate and just is managing the property for his grandchildren, he wouldn’t issue a 1099. Managers don’t usually file tax forms TO their employers.
Entering the value of RE on the FAFSA is not the same as entering the balance in an account. We’ve seen on CC many time people asking what is the value, and most agree you should take the ‘quick sale’ value, what it would sell for today. In this case, the land is worth a lot more to the family than to anyone else, but for a quick sale value that is irrelevant. What would the land sell for today? Zillow rating works for some, tax value works for others. FAFSA doesn’t define how YOU establish value. Does it have restrictions on it such as leases, life estate, taxes owed? those all reduce the price you could get for it today. Even for a trust, you report the value on the day of filing, not the value last month or what it might be in two years.
The OP only knows about this ‘gift’ because his father told him. There may be lots of kids filing FAFSA who have no idea their grandparents have left them land, personal property, coin collections, art, and plain old cash. We can only report what we know about.
Not the person with a life estate as it is his property to use until he dies.
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The OP said there is no life estate or trust. See Posts #14 & #27.
The kids own the property in full and have the right and ability to sell it. The grandfather is collecting rent and depositing the money into an account that the kids have no access to.
As the kids are the property owners, they are legally entitled to the rents, but they haven’t been receiving them.
He’s not their “manager”, because he isn’t giving them the income. He’s depositing into an account, apparently in their name. That makes him their “nominee” and responsible for filing a 1099: