FAFSA Question

Paying for College
1

<p>This is a fairly complex issue. Any help would be appreciated. </p>

<p>How will children's Federal financial aid, ages 6 and 9 currently, be affected by their father who just passed away. Their mother is wondering how she should invest the life insurance money (529 accounts or personal account) so that the children are still eligible for Federal aid. I am trying to gain an understanding of how the process works.</p>

<p>Obviously a lot can change in the next 10 years before the kids go to college but she doesn't want to jeopardize what the kids would be entitled to receive. </p>

<p>Thanks.</p>

2

<p>The only thing that matters for aid is not to put the funds in the child’s name, unless in a 529 account. Assets in child’s name count against aid 20% per year, except 529 accounts. 529 accounts and assets in parents’ name count at 5.6% per year.</p>

3

<p>

The mother could setup UTMA 529 Savings account for her children.
Also, if the mother is the beneficiary of the life insurance money, I think she could only contribute up to $14,000 to each of her children (annual gift tax exclusion.)</p>