Hi,
Inheriting a home from a deceased parent seems to have increased our family’s EFC from 12,000 to 54,000. It is a second home that we are planning to rent out. I know the eventual rental income will affect our EFC in future years, but wondering if anyone in a similar situation has experience with how the asset aspect of owning an inherited home (which will be a second home, not our primary residence.) As far as I can tell, I need to report it in the “investments”(which says to include real estate) portion of parent financial data. Would transferring title of the home to our family’s trust enable us to not report this as an investment asset? The change in EFC seems a high price to pay for a non-liquid asset. thanks for any thoughts or similar experiences.
For your EFC to go from $12k to $54k means that the home has a high value …since assets are only assessed at about 6%. For instance, if the home had a value of $1M, then it would add $60k. So, since your EFC jumped by over 40k, that suggests that the home is worth about $660k. Either that, or you inherited other assets/money as well.
The home may be a non-liquid asset, but it “could” be rather easily sold.
Schools aren’t going to give you more aid just so that you can keep a valuable asset.
Transferring to a trust does NOTHING unless you don’t own any part of that trust.
Have you been reporting the assets in that “family trust”?
edit… Please tell the whole story…
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inherited a home and some cash, plus had an about 15% income increase an
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ok…it’s not just the house that’s increasing EFC. How much is the home worth?
Does your child attend a school that meets need?
Watching this closely as we will be in the same boat next year. This may affect things if my S was to get into his reach school.
Thanks. Yes, the home is valued at $600,000 and we did inherit a little cash, too. We do own the family trust, and have been reporting everything, tho this inheritance just became ours in January, so it’s a new wrinkle. Thank you!
Well, since you’ve been reporting trust assets already then you already know that putting the house in a trust doesnt change anything.
Does your child’s school meet need?
Looks like you received about 50k in cash assets?
I know this is frustrating…particularly knowing if you received this during a later part of your child’s junior year, it wouldn’t have this effect.
How much does your child’s school cost? What year is your child? What need-based aid had he been receiving?
@CAMidwestMom If you’ve inherited a large amount this year, then it will affect your child’s aid at many schools. If that’s fine with you and you’ll just pay, then super. If not, then tell your child now so he won’t be disappointed next year when there’s little/no aid and you won’t pay.
Hi, re: reporting trust assets. We have not had any of any significance until now – except 529s, which we are very grateful to have. Our child is a sophomore. He received $22,000 in grant as a freshman, toward the COA of $64,000 and we were able piece the rest together with 529, cash and some student loan. So just looks like that will be considerably tougher going forward! Better get back to work!! Thank you for your input. It’s a great school and our son is very happy there, so we are determined to make it work.
Similar situation here. We went from some aid to no aid. But we are not comfortable about paying 65-70K per year for the most expensive options as the world is an uncertain place and we will have to fund two college educations.
However, there are many fine colleges and universities that offer merit scholarships and/or where the COA is not 65-70K per year. In the grand scheme of things, the added financial security is a blessing.
Glad that you are watching it. I thought I had thought through the cost factors involved, but had not predicted how an inheritance would affect things…
The only way around this would be for your family income to be below $50,000, and you can either file a 1040a or 1040ez, OR one of you is a dislocated worker…OR you qualify for a means tested benefit like SNAP or free/reduced lunch. If that were the case, your assets would not be counted per FAFSA as you would qualify for,the simplified needs test.
But there is no simplified needs test for Profile schools.
Since that doesn’t sound like its the case, this new inherited home is an asset, and the equity in that home is a reportable asset on your financial aid forms.
Schools do not award need based aid so that families can own second home/rental properties.
.Since the income potential from the 2nd home (as a rental) and possible as a nest egg for retirement, it’s important to keep that asset.
Sounds like this will only affect the last 2 years. As you mentioned, you received cash and an income increase, and there’s the potential for more income by working more AND by renting out the place.
As someone who owns rentals, if your agressive and have a good plan in place, if needed, you can rather quickly get the home ready to be a rental. If done rather quickly, it can produce income to help pay for those last two years of college.
Depending on the home, its location, floorplan, local zone codes, if it’s large enough, perhaps it could be split into a duplex for better income.
Sorry to hear of the loss of your parent. With all the emotional stuff that this entails on its own, then finding out there is this significant an impact on financial aid is tough to swallow, especially if it was unexpected.
We lost both of my in-laws in the same year, and inherited a modest amount of cash. Since the cash came to us, it was assessed at the parent asset level, and S’s need decreased slightly from freshman to sophomore year. But we had the cash so we paid.
When my mother passed, my father was advised to revise his will to leave any assets to my brother, sister, and me, and not to his grandchildren (then in high school), as it could impact their financial aid more. He knows we will use anything and everything to help them, but he has convinced himself and us not to leave this world until his youngest grandchild leaves college.
I don’t think an inherited vacation home is non- liquid. If you own it free and clear, it has value as collateral for a loan or you could turn around and sell it for cash or donate it to the Audubon Society and take the charitable write off.
I.e. it has many ways to be “valuable”. Even just selling half of it to a family member today so you retain 50/50 ownership provides you with a large chunk of cash right now while still preserving the future income stream (or at least half of it) once you rent it out.
Nice problem to have!
How much rental income will you be able to get a year? With the inheritance, will it make up for not getting the $22,000 grant per year for the last two years.
@mom2collegekids, thanks for the response. It is supposed to be this year, but we don’t have it now and it depends on the sale of a house later in the year. It has factored into the process. Thankfully, S has significant merit aid at two of his favorite schools. If he happened to get into the lottery school next month, it would put a big wrinkle into things. I honestly will just have to cross that bridge if and when I come to it. I cannot complain about the fantastic luck to have in-laws who bought a house in CA in the 50’s and kept it to hand down the $$ to their children. The timing is a bit of a bummer, but as I said, it would be silly for me to complain.