I’ve read a good deal of info on the topic, and am still unsure of how to proceed, so am asking here:
My daughter will be receiving an inheritance from her father this year,actually in the very near future. Her father passed last year and the Estate is finally about to be closed up. She is a sophmore in college. We just this week completed the FAFSA for next year ('16-2017). I did not include her inheritance money, as I am not exactly sure of the exact amount she’ll receive.
1 - when she receives this money, do I need to send a Correction to FAFSA for the application we just filed? Or is it next year that we'll have to worry about reporting it? And, if that's the case, if she spends it (say by paying off her prior year's student loan or buying herself a car) will we have to report it at all because she will have spent it by then?
2 - can she "gift" the money...say to her grandparents, so that it is no longer HER asset? is that an option? then maybe in the future her grandparents "gift" it back and pay her school loans? I know there are limits on cash "gifts" for tax purposes but if we stay within those limits...
3 - what if she "signs the check over" to me, and I just write checks to pay off her previous school loans....is that "gifting" in IRS eyes? or at least in FAFSA eyes it wouldn't be penalized so much as an asset?
I want act legally and ethically here, but I also want to do my best to make sure this money goes as far for her as possible.
Thanks in advance for any guidance/input!
thank you for your condolences. It’s under $50k. and our EFC: 015537
I feel like this is higher than it was in the previous year and I’m not sure why, bc last year my income was a bit less as I had to stop working due to a health condition and am now on disability.
Anyway, in knowing those numbers, are you better able to help try to answer my questions? I just don’t want to do anything wrong, but she’s had some rough times and I’m praying she can get some kind of break with this money.
Thanks!
Somebody correct me if I’m wrong, but the FAFSA you filed this year is for income received last year - 2015. So you don’t need to send any corrections if/when she is paid this year.
Further, my understanding is that for next year’s FAFSA (funding for 2017-2018, when your D will be a senior), they will be using the same numbers as were submitted this year, so this may never end up having to be reported.
This is correct; for income purposes, the inheritance received this year will have zero impact on financial aid eligibility purposes, because this student’s senior year FAFSA (and Profile, if applicable) will also use 2015 income information. If the inheritance money, or part of it, is still sitting in an account somewhere when that FAFSA for 2017-2018 is completed, it will need to be reported.
The fact that you put the word gift in quotes is very telling. Such an arrangement would not in fact be a gift, because there would be strings attached - she would be expecting to get the money back at some time in the future. Therefore, the money would still be considered her asset, even in the hands of her grandparents.
In the past 2 years we’ve had an EFC of around 010161. Her college tuition totals $45k/year and we end up having to come up with (take a loan out for approx $15-20k each year). She gets subsidized and unsub Stafford Loans, and last year got a Pell grant, but not her 1st year. She does receive Grants from her college totaling close to $20k/year. So I guess in all reality she must not receive that much need based aid anyway, correct? So, I don’t have to report it this year, and our plan is when she receives the money she wants to pay off the 2 loans we have for her 1st two years…then if there’s anything left by next FAFSA we’d report it as asset, though there may not be any left by next year at that time…
I was not aware of that in regards to the Senior year income information for FAFSA, good to know. And yes, I understand about the “gifting” scenario… thank you.
Like I said I want to keep it on the up and up, just looking for any loop-holes that may be out there we could take advantage of
You can talk to the executor… there may be a way to structure the payment so she doesn’t get it all at once if you are worried about both the aid implications AND your D spending her inheritance unwisely.
But it does sound like paying off the highest interest loans first is a good use of the money in this case.
Thanks. My daughter’s wish is to pay off school loans so she can be left with as little debt as possible upon graduation, and that was her father’s wish for this money as well. I’ve researched investing it but it does not seem to have much benefit as the average growth is 4-5% and the loan interest rates are greater than that, so getting them off her plate now seems best in my opinion as well. I really was just worried about the aid implications…thanks so much for the response! they are all greatly appreciated!
If she still has some of the inheritance assets remaining when it comes time to file FAFSA for senior year, she could place them in a 529 college savings account, and they will be assessed on FAFSA at the parent asset rate instead of the much higher student asset rate. She could then spend down the 529 account to pay for senior year qualified expenses.
Am I reading this incorrectly? You say your EFC the last two years was $10161…and your daughter got a Pell grant? How so? The maximum income to qualify for the Pell is in the $5000 EFC range…certainly NOT $10,000.
Grants can be based on need (at all the Ivies and many of the other elite schools) or can be based on merit or a combo. No way to know from the info you gave.
Agree that getting a Pell with an EFC of $10k doesn’t seem right, but the FA officer may have used Professional Judgment because of the family situation
It certainly wasn’t the max amount you can receive for Pell Grant but she did receive one. Not sure how, I filled out the FAFSA with my tax records and she was awarded one last year. From what I’ve read, it’s for low income and also middle class income families with awards ranging depending on that. We fill out FAFSA every year in hopes she qualifies for any amount, big or small to help offset the costs. Maybe the regs change each year with the government? idk…
With a $10,000 EFC you would not have been eligible for a penny of Pell Grant money…at all. The income threshold has gone up for this year…but only because the amount of the maximum Pell has increased. Regardless…the EFC threshold is about $5000…not $10,000.
Are you sure this was a Pell Grant? Could you be mixing this up with a Perkins loan?
possibly. I will be sure to check my records. I surely wasn’t trying to start a convo to discuss all of my specific and personal info, nor to upset anyone…I started this thread to ask about the inheritance, so thanks everyone for your input re: that. It’s been extremely helpful and appreciated.
No upset, it’s just that a change in EFC affects some types of aid and not others, so we’re trying to figure out what you have. If you had an EFC of say $2k and that jumped to $20k because of the inheritance asset, it would cause her to lose a lot of need based aid, including a Pell grant, SEOG, work study. If she doesn’t have any need based aid, her EFC could jump to a zillion without really having much affect.
I think the big question is that $20k in grants from the school and on why it was granted. Merit? Need? Combo?
