<p>Hey guys.
I will be attending Boston University this incoming fall but I have a problem. My father passed away when I was 3 and my mother passed away 2 years ago, so I have been living with my aunt who is my legal guardian and so I filed FAFSA as being independent/ emancipated minor. But my mother had life insurance, so when I turn 18 in August, I will be getting around 100k after taxes. My problem is that I am afraid that BU will not give me as much financial aid for my sophomore year as they have this year. And the thing is, I want to save my mom's life insurance money because it means a lot to me, and my mother meant for me to use that money for other purposes, like putting a down payment on a house. Does anyone know what my options are?</p>
<p>I am so sorry that you lost both your parents. I can't imagine that you won't have to report the life insurance on FAFSA. You should talk to an accountant or financial planner to get opinions though.</p>
<p>Hmmm....this student is an independent. Do independent students qualify for the simplified needs test??</p>
<p>An independent student does not qualify for the automatic zero unless they have a dependent other than spouse. May qualify for simplified needs in future years so assets should not be taken into account in future years. But for next year it may be a problem as the insurance will be income.</p>
<p>Definitely talk to the financial aid people. Sometimes they will at least not double count the insurance (as an asset as well as income).</p>
<p>There is some discussion here though it relates more to a spouses death.
FinAid</a> | Professional Judgment | Proceeds from a Life Insurance Policy</p>
<p>If the life insurance has not been claimed or put into a trust for you, You could perhaps not claim the value since you have not received the amounts. Talk to the life insurance people, it is in their interest in delaying payments to you.</p>
<p>My understanding is that if not claimed, it is not an asset, but if claimed, it is income. Maybe the proceeds can be deferred somehow? Definitely see someone before you turn 18 - it would seem that if something can be done, it would have to be done before that.</p>
<p>Ask the insurance company what your options are. This will depend on the kind of insurance/retirement policy it came from.</p>
<p>For example, if some of the money came from an IRA or other retirement vehicle, it might be able to roll it into a "Beneficiary IRA". This would mean that while you would be required to take out a certain percentage every year based on your life expectancy, the bulk of the money would not be visible to the financial aid process because it is a "retirement fund". As a beneficiary IRA your would be required to pull out a certain percentage every year, but that is the minimum you have to take out. You can take out more. And, when you are ready to take out the money for a house (for example) you could pull out that big chunk and close down the IRA.</p>
<p>I'd also suggest that you PM Taxguy. He may have other ideas for you.</p>
<p>Wishing you and your aunt all the best.</p>
<p>thank you all for your responses. the thing is, my moms funeral expenses have not been paid because I didn't have the money to pay the 9k, so the director graciously said that he would wait until I got my mom's life insurance money. I was thinking about maybe taking out a loan to pay for the funeral expense but I'm not sure where I can get a private loan that doesn't have a high interest since I will not have a co-signer.
If anyone else has any suggestions, that would be great. I will indeed try PM'ing taxguy as well. =]</p>
<p>Actually, life insurance does not count as taxable income ( Frequently</a> Asked Questions - 4.9 Life Insurance & Disability Insurance Proceeds ), through you probably have to report it on the nontaxable income worksheet. I'm sure it would count as assets. It depends on how your college counts it, because, as long as your income is less than $50,000 and you are eligible to file a 1040A or 1040EZ, I think you would qualify for the simplified needs test which disregards assets. It will probably come down to a professional judgement decision by the college. That is discussed here:
FinAid</a> | Professional Judgment | Principles of Professional Judgment scroll down to "Principles Concerning Income." Likelihood is, they would average your income over several years (which would get you below the simplified needs test limit) or disregard some or all of it on the income side, but count it as an asset.</p>
<p>I do want to explain why I think it should count against you as little as possible. $100,000 seems like a lot of money, but it is a pittance in replacement of a parent, much less two. When I think of all our parents did for us when we were starting out, all the help, gifts, and encouragement they've given since, I think $100,000 doesn't begin to touch it.</p>
<p>Hi, I'm new this forum. I am an Author, Financial Aid Planner and insurance agent.</p>
<p>You could roll some of the proceeds, like say $50,000 into a safe FIXED deferred annuity, with a short withdrawal penalty period. It's possible to get one with as short as a one year withdrawal penalty period. Then you roll it over again until needed. This will then count as a special retirement plan that does not need to be reported on the FAFSA. If you later decide you need that money and you aren't in the withdrawal penalty period, you can take all the money out, or only part of it.</p>
<p>If you take it out before age 59 1/2 you will pay taxes and a ten percent IRS imposed penalty, but only on the INTEREST earned, not on the principal. I don't think everyone should always do this for any reason, but it seems fair in your situation.</p>
<p>Lee Martinson
Diploma Therapist</p>
<p>I gave BU a call and they said they would get back to me with further information but from what they initially told me, they would need me to send documents and etc. for them to determine my financial aid for next year. So, I'm waiting for them to call me back and give me more information. I am hoping that I will be able to do the simplified needs test.
and Lee Martinson, you just completely lost me. Do you mean that I should defer the proceeds into an annuity, and withdraw it year after year after I file the FAFSA each year?</p>
<p>I think since your circumstances are unique and specific that you should perhaps PM any other details - or better yet, find a real live person to meet with who has similar credentials to Martinsen. This board is far from anonymous to those who desire to make it otherwise and finaid seems to bring out the worst in people. I wouldn't want any issue to be made of your situation.</p>
<p>I am not to saying to withdraw it year after year. I am saying that if you have earmarked that money for retirement and don't want it to be used right now that an annuity might suit your purposes, and save the money from assessment. But Cartera45 is right in that your situation is unique, and that would be a big decision, and you should consult someone who is licensed in your state to deal with annuity issues. You shouldn't act on something like this without looking into to it further and getting all the facts--it may or may not be right for you.</p>
<p>Agree; you guys should PM each other. Lee, she may need assistance in finding someone in her locale and in examining someone's credentials to be sure they're kosher. Remember she's only 17 and, therefore, not sophisticated.</p>
<p>Derived813: I mean, not sophisticated in these matters only!!</p>
<p>So, I have called the life insurance company and they have told me that I will HAVE to claim the benefits when I turn 18.
And I am not sure where I should turn to to find someone near my area to help me out. Can anyone point me in the right direction by any chance?</p>
<p>You may want to seek the services of a Certified Financial Planner or Certified Financial Advisor. Talk to older mentors, your bank, your extended family members. They might be able to recommend local names. You can look in the yellow pages, but this is the type of service where it is nice to have a recommendation from a source you trust before engaging a pro's services.</p>
<p>Good luck.</p>
<p>So when you turn 18, you Have to claim. But suppose you don't claim until you are 18yo +30 days. Have you Lost the life insurance benefit? Do they send you the money on your 18th birthday regardless? What happens if they automatically send you the check but they are +30 days of your birthday-do they reclaim it? </p>
<p>Our UGMA for our son: He is entitled to the funds on his 21st. He can claim the funds on his 21st. He may have the funds on his 21st. If, He is out of state and cannot physically sign in state and have provide proof of his age in person, can he claim? The brokerage company that we used, also had me, the custodian, to relinquish the authority of custodian. If I refused, his claim/entitlement to the funds would be much delayed. </p>
<p>Seek other advice. Carefully read the Fafsa form.</p>