<p>need help. My daughter, who is a Junior in HS, is about to inherit $100K (in an untouchable trust) from a deceased grandparent. I am terrified that Financial Aid Officers from prospective colleges will dramatically reduce her financial aid offers. </p>
<p>Because the money is going into a trust fund that she cannot touch until at least 25, I am afraid she'll a) have to borrow significant funds and eventually have to pay the loans off when she's entitled to her trust and b) not have the ability to meet the EFC from her ultimate college of choice. </p>
<p>Questions: </p>
<p>1) What is the best way to invest the trust so that it hurts the least from a financial aid perspective? </p>
<p>2) Has anyone gone through this? If so, can you share your experience(s)? </p>
<p>You are right to be concerned. Assets in the childs name are kind of a worst case scenario when it comes to financial aid. Under FAFSA 20% of a childs assets are used towards the EFC per year. If the trust were in the parents name only @5.6% would go to the EFC per year. Finaid has some information about trust that you may find useful. Good luck.</p>
<p>ok - this is bizarre - the link above should end /trust funds.phtml (without a space between trust and funds) but it keeps changing to tru****nds ???</p>
<p>There would be a penalty if she withdraws it later on for nonqualified educational expenses, but she may be able to make withdrawals to pay off educational loans, and the money would be available for grad school. </p>
<p>I don't know if that is a workable possibility or not -- I am just suggesting it as an option to explore.</p>
<p>I am in the exact same situation, I inherited money a year ago which is now in a trust. There is not alot you can do, financial aide offices will take 20% per year towards the cost of her education. The question on the fafsa is not can you access your trust but do you have a trust. It is a rare Trust that cannot be accessed for the health, education and welfare of the beneficiary. Are you sure about that? The money may not be in her control until the age of 25 but usually the Trustee can make distributions for education, health etc.. Who is Trustee? </p>
<p>The bottom line is that I got $0 financial aide. The inheritance will be long gone by the time my junior year is over, if I decide to go to the expensive LAC.</p>
<p>I know one way people get around this issue is to not report the Trust. Income, if not distributed, is reported on the Trust's tax return not the beneficiary's. The only time a beneficiary reports income on her personal return is when a distribution is made, therefore, if there is no distribution then the FAFSA people have no way of knowing a trust exists. I am not the sort of person who can do this but many suggested this option as I do not get distributions from my Trust.</p>
<p>Cubsfan...the Trustee is the Executrix. She has made it clear that the intention of the benefactor did not want to see that money gobbled up until she was gone and has no intention of distributing cash for education. </p>
<p>Now I will have to consider your idea about non-reporting. It's not really my style but it has to be thrown into the mix.</p>
<p>I think that I would pay for a one hour consultation with an attorney who specializes in estate planning. I realize that the planning was done already, but there still might be things that can legally be done about it. Just a thought.</p>
<p>Cubsfan...I clearly cannot multitask. Reading my last post...it was gibberish. Let's try again: The Trustee has stated that the benefactor did not want the trust devoured by college. Instead, she wanted it to be available for my daughter when she was an adult; therefore, my daughter cannot use the funds for education.</p>
<p>Even if she could, I wouldn't want her to. It really blows. </p>
<p>I guess the whole tenor of this bothers me. We inherited money while my kids were in school, and it went straight to school. We were lucky to have it.</p>
<p>It would be nice for a kid to go to school on someone else's dime (financial aid) and then have 100K to work with when she was done, but I don't understand why anyone would feel it ought to be that way, when so many students with no other resources have trouble paying. FA is not infinite; every dime comes from somewhere, and someone.</p>
<p>I've never understood the impulse to hide resources--I just feel lucky that we have them.</p>
<p>It is just human nature to think that once FA offer is given the amount of 'free' money should stay the same. Whatever 'extra' they get either via outside scholarship $ or inheritance should be off limits. Many forget that many of the outside scholarships have some income factor.</p>
<p>People forget the basic and simple premise of fin aid - aid to help in your need. If you have more $ (either via outside scholarships or lottery or the death of your rich uncle), YOU HAVE LESS NEED.</p>
<p>Not only is it fraud (responding to #14), but if more than one family member have talked about lying about the trust and benefit, even indirectly, it is a criminal conspiracy. The whole family could go to Club Fed (the federal penitentiary). </p>
<p>Although for a legal fee of about $50,000 a good defense lawyer could get them probation. It would suck though being a convicted felon the rest of your life. Just what Grandpa was hoping for when he set up that trust for Granddaughter.</p>
<p>Even if the trust is set up to avoid direct payment to college, your D can still "use" it to pay for college. How? Take out loans for whatever isn't covered by other merit grants, etc. Then pay off those loans once she's out of college with the money from the trust. So she, in effect, graduates from college debt-free.</p>
<p>And that's probably how the colleges' FA offices look at those "restricted" trusts as well - whether the money is available to the kid when the tuition bill comes due, or afterwards, the kid can use the money "for college". And why shouldn't they be expected to do so? Why should she expect to go to college on someone else's dime (which is what FA is, after all) and still come out with a $100K nest egg? </p>
<p>I don't see anything wrong with considering assets that will be available after college when determining FA.</p>
<p>I think that is what a friend of Ds did, who has a trust fund that does not become accessible until he reaches 25.( although it might be older).</p>
<p>He did have to take out loans like everyone else, but he has the secure knowledge that he has much more freedom in accepting jobs because his loans aren't hanging over his head like they may be with other grads ( like my D)</p>
<p>Knowing that she has a trust fund of that magnitude will allow your D not only to have many more choices of jobs after graduation, but in colleges as well. Yes the trustee would prefer that, that govt and the institutions money be used to pay for the college expenses, but if you are giving money to someone else, out of generosity or to save yourself taxes, you also give up some control.
( and if it is a living trust, and is claimed under your daughters ss#, she would be liable for tax- I think depending on your state laws and type of trust)
<a href="http://www.wsba.org/media/publications/pamphlets/trusts.htm%5B/url%5D">http://www.wsba.org/media/publications/pamphlets/trusts.htm</a></p>