How will my dad's life insurance affect my financial aid?

Paying for College
21

Thumper, those are the requirements for the simplified asset test. If the mother earned under $24000 in 2014, it would be the automatic EFC $0.

Jorgejj7, as Blossum said, you need someone to help you because the entire FAFSA filing is wrong. They shouldn’t be basing the appeal on what’s been filed, they should make the corrects, figure the award and THEN see if you need to appeal. Probably won’t have to since you’ll show no income and no assets.

  1. You need to have the change made to the parent status to just your mother (use AnnoyingDad's information)
  2. You then need to enter her income as $0 (if it really was zero)
  3. This WILL trigger a verification requirement and they will ask for her tax return and she will give them the one that includes your father's income too, so it will have to be a manual override by the school. This happens when the parents are married at filing but divorced (or just separated) for FAFSA purposes. It happens, and is not all that unusual that the tax filing status doesn't match the FAFSA filing status.

Life insurance is not income. It might be an asset, but this student should not have to report assets under the automatic zero EFC test.

JorgeJJ7, you are doing a good job. Just stay with them!

22

The auto 0 also requires 1 of the same additional factors that the simplified formula requires.

23

@twoinanddone as annoyingdad noted…the other criteria must be fulfilled for auto $0 EFC as well. It’s not just the income threshold.

24

I think death benefit of a life insurance can pay out quickly because it passes out of probate directly to the beneficiary listed.

25

Mom- yes, always possible. But now I’m wondering if the mom is eligible for other death benefits from the H’s former employer (option to stay on his health insurance for example- at a lower cost than what she may need to pay on an exchange or purchased privately) which may not have been fully explored. Not clear if a lawyer or executor was involved who sat down with the family (are there other minor children?) to review the options for how to structure payments of an insurance policy, put some proceeds into a trust, make sure that any eligibility for entitlements is met, etc. If the mom’s income going forward is truly zero, how many years until she qualifies for SS as a retiree?

But for sure I think there were some errors on the initial FAFSA based on what the OP wrote. This is a lot for a kid to manage.

26

@blossom, yes it does not sound like anyone advised the mom.

I think you might have to contact the insurer if you want something other than lump sum payment. Maybe it depends on the amount as well.

27

Yes, Jorge needs to go to talk to the FA office to get his FAFSA corrected with only mom on it. Then the income on the tax return can be matched up with dad’s W2 to show it was all his income.

28

And you have to contact the former employer in order for survivor benefits (if you are eligible) to continue.

29

Thank you guys so much! I was actually thinking of just changing the income on FAFSA to just represent my mother like you guys are saying but then my sister would have to change it too. My sister is going to our local school, UCI, and she will be living at home so her cost of attendance is now 0 and I didn’t want to make her make changes too since everything is set for her. But I will call the FA office and try to get my FAFSA changed before filing an appeal.

And no I do not have an adult that is helping me with this unfortunately.