Inheritance and FASA

Paying for College
1

<p>Hello, my parents recently inherited a 401k from a grandparent for the sum of around 25-30k. I don't know all the details yet, but I am in the middle of helping my little sister make a college decision that relies heavily on Financial aid. She got a decent amount for 2013. Everything I have read so far on IRS.gov and other net searches, pretty much tells me that this money is pretty much income for that year. They have already paid the taxes from this money, but I really feel like my little sister will lose the Aid for at least next year. </p>

<p>Can anyone confirm my suspensions? I believe this has to be reported as other income on the FASA right?</p>

<p>Is there anyway that either a purchase on a condo or car can decrease this amount for FASA purposes? I understand that for tax purposes it will, but I am more worried about my sister and FASA. Thanks!</p>

2

<p>Worst case, it is one-time income that can be backed out by the College when determining the EFC. It will possibly be then valued as an Asset.</p>

<p>You did not say how your parents took the inheritance. I believe they could have elected to take it as withdrawals over their lifetime. If so, then it would have a negligible effect on income, and increase their retirement assets.</p>

<p>In either case, there should not be a large adjustment to EFC.</p>