Hello, I am stuck in a dilemma right now.
To give a brief summary, my father passed away from cancer in October of last year.
Since he was the only source of income for our household we filed taxes under his name and realized that his income was the one we had to report on FAFSA. Consequently I didn’t get as much financial aid as I need considering my family has no income now.
UCSD was one of my choices and they gave me a new financial aid estimate after sending in a few forms. I wanted to go to UCSB but they wouldn’t give me a new estimate until I committed to their school. They allowed me to submit my SIR to both schools but later I was asked to choose. I told them I wanted to go to UCSB but I needed to know how much money I was going to get. They got some information from me and told me my cost of attendance would be the same as at UCSD so I chose to go to UCSB.
Now they are asking me for my father’s death certificate and his life insurance statement but there is one problem; my family received a lot of money from my dad’s life insurance. I am scared that all this money will negatively affect my financial aid but the reality is that this money is going to be used to pay the household bills for the next two years. My mother is incapacitated and cannot work so this is the only money we have to pay our bills and both mine and my twin sister’s college tuition. Now I am thinking of just stopping the appeal proccess and staying with the financial aid that I got. I would really need more financial aid but I fear that reporting this would just cause me to lose financial aid instead of getting more. Should I just not appeal or should I risk it and send in these documents?
So sorry to hear about your dad. @kelsmom Can you answer this? The UCs are FAFSA only. Since the dad passed in 2014, I’m not sure his income should have been used as the mom was the only parent filing FAFSA.
Technically the mom has no income, but has the insurance pay-out. What PJ should this student ask for?
@mom2collegekids I actually thought the same thing but I contacted the financial aid office and they told me to put down the income that was shown on our tax return and that was my dad’s. I didn’t find this fair and that’s why I wanted to appeal.
Jorge- condolences on the loss of your dad. How sad for your family.
I realize this is a delicate thing to discuss with your mom, but do you know when the life insurance paid out, and where those proceeds went? Was it a big lump sum payment which is now sitting in a checking account, or has some of it not paid out yet, did your dad have other assets and a will, is there an executor for his estate (i.e. another grown up or a lawyer who is responsible for making sure that the taxes get paid, and the assets get distributed according to your dad’s wishes and the in accordance with the law of your state).
If there is someone else who knows your family’s situation I’d encourage you to get them to help you with this. Plus the situation may not be as dire as you think- when someone says “we got a lot of money from life insurance” it doesn’t always mean that they’re sitting on a bank account with 100k in it… the money may not have been distributed yet, especially if you and your sister are beneficiaries since you were minors when your dad passed.
That advice from FA seems wrong. I hope that @kelsmom can chime in.
even if the dad’s income gets included, it would seem that professional judgement would come into play. This is worse than when a parent loses his/her job and is unemployed for awhile. In this case (obviously) the dad’s income can never exist again.
The life insurance was paid out in a check shortly after he passed @blossom. UCSB’s financial aid office was asking for a copy of that statement.
My biggest concern is will it negatively affect my financial aid or not? I know it’s a delicate situation and it would be unfair if I lost my financial aid through a proccess in which I am trying to get MORE financial aid.
I don’t know how the life insurance policy would get lumped as Dad’s income. I think the concern is that the assets are now sitting in a checking account- so they get counted as assets.
OP- is there another grown up involved who can help you navigate some of this?
Insurance proceeds count as income on the FAFSA in the year received. They also count as assets. After you submit the FAFSA you should ask the college for a professional judgment review. Most colleges will adjust the FAFSA to stop the insurance proceeds from being counted as untaxed income, but will retain it as an asset. After all, life insurance proceeds are a one-time event that is not reflective of income during the award year. The college may also make an adjustment to income to exclude your father’s income for similar reasons. If your mother has any unusual expenses, such as unreimbursed expenses associated with a disability or medical condition, she should tell the college about them.
Note that if your mother’s income is less than $50,000 and she is eligible to file a 1040A or 1040EZ or meets certain other criteria, the federal need analysis methodology will ignore her assets. Otherwise she should consider whether to use the life insurance proceeds to pay down debt such as a mortgage, auto loan and credit card bills. Consumer debt is not considered by need analysis formulas, while financial assets are counted against you. Assets are reported as of the date you submit the FAFSA.
If you can’t get this straightened out in a favorable fashion, you may need to ask for a one year delay in enrollment. At that point, the asset may not count because your mom has no income…
does your mom receive SS for you, herself, and any other kids?
@TempeMom@TiggyB62 yes the life insurance money was received before the end of last year but for one reason or another we were not asked to report it in FAFSA. I requested a review because my mom does not have any income. And while it is a once in a lifetime event, it’s a large amount of money that could pay for college for a few years. However, like you mentioned my mom does have other expenses to take care of like mortgage and that is what that money will be used for. Therefore, we dont really have any money to pay for college and that is why I was appealing my financial aid.
Bottom line, is there no reason why sending in my dad’s life insurance statement should negatively affect my financial aid?
sorry for your loss, but the reality is your dad’s life insurance $$ will affect your FA.
To colleges- $$ is $$ regardless of where it came from. that $$ is an asset that can be used to pay for your college expenses. You may have to take a gap year and reapply to a less costly college- such as a CSU.
@menloparkmom Well the only reason they’re asking for this information is that I am appealing to get more financial aid. I can simply not appeal for more financial aid and I would not have to report the life insurance money.
It doesn’t sound like OP can just stop the appeal process, they are now requesting the insurance information, by not disclosing it, don’t other issues come into play?
You said the life insurance payout was in 2014 and you filed sometime in 2015. I think there were some other mistakes made not in you favor. You were only living with your mother on the day you filed FAFSA, and had been for the 12 months before that ‘more than any other parent.’ (Say, for example, you filed FAFSA 1/15/15; you lived with your mother for the last 12 months but only with your father for 9 months; longer with mother, use her information) It is confusing because the IRS considers your mother still married and able to file as married on 12/31/14, so her filing status on her tax form is ‘married’ This is going to cause the FAFSA forms to ask for both incomes, and you shouldn’t have had to include your fathers. Next year your mother can file as Head of Household, so it shouldn’t be a problem.
If your mother has no income, you’d be eligible for an automatic $0 EFC so the life insurance asset wouldn’t have to be reported. I don’t think the online system can handle this. I think the school needs to make corrections the FAFSA.
As of right now, your FAFSA form is incorrect and just cancelling the appeal won’t correct it. If you listed your father’s income and it was above $50k, then you had to list all family assets and the life insurance proceeds had to be listed, not as income but as an asset. The money is somewhere in your mother’s name, so it is her asset. I would first argue that you incorrectly filled out the FAFSA including your father, but should have only listed your mother and her income ($0), that you should qualify for EFC of $0, and don’t need to
@twoinanddone Yes I agree with you and that’s what I wanted to put on FAFSA but I called and they specifically told me to put my father’s income. The reason for this is that my mother filed a joint tax return because that was her only option since all the income of 2014 was my father’s income. Due to that, I had to put that information found on the tax return on FAFSA as well and they told me that I could simply file an appeal later.
Maybe I’m wrong…but if your father died in 2014, I do not believe any income from him would be listed on the FAFSA for 2015-2016.
I’m not sure that life insurance is considered “income”. I thought it wasn’t. But someone will need to verify that.
@twoinanddone the OP needs to satisfy one of the other criteria to be eligible for auto $0.
If only your mom’s $0 income was supposed to be on the FAFSA, then it is possible that you could have an auto $0 IF you fulfilled one of these other criteria as well.
Parent is a dislocated worker.
Or
Family qualified for means tested benefit like SNAP or free or reduced lunch.
Or
Family was eligible to file a 1040A or EZ form.
If that is the case, the assets would not be counted.
I thought that the life insurance was NOT income- but would show up as an asset wherever it ended up landing. And if the dad died in October of 2014, I’m surprised the payout was made so quickly such that it was part of the assets on hand when the FAFSA was filed. (it usually takes time after a death to get the ducks in order to so speak).
But I do think this is a lot for a kid to manage- which is why I’m asking (again)- OP- was there an executor, a lawyer, some other trusted grown-up who can potentially help you with this appeal? I’m just not sure that the U is basing its decision off accurate data (not your fault, this is confusing stuff given your situation). And with two minor children when the dad passed, not sure if the insurance was all intended to just go in one big lump into a banking account vs. being paid out over time, or in an annuity???
The person who told you to include your dad’s data may have been a lower level employee who didn’t know the correct answer. Your appeal should involve higher level people who should know the correct answer to this. You need to include on fafsa only the portion of the tax return info that applies to your mom.