<p>A grandparent of mine recently died and he left my father an inheritance of around $75,000 in cash, savings, and checking and $225,000 in investments. But my family still has only one working parent and he makes only around $25,000 a year with no other major savings. How much will the inheritance hurt me when i apply to FAFSA?</p>
<p>With federal methodology (used by FAFSA only schools & for federal aid at Profile schools), the inheritance will not count IF your family qualifies for automatic 0 formula: less than $30,000 AGI (parent) in 2008 AND parent could file 1040A or 1040 EZ OR someone in the family received federal means tested benefits within the past 2 years (free/reduced lunch, WIC, TANF, SSI). If that doesn’t work, at least the asset protection allowance will shield a good portion. Go to a financial aid calculator and run the numbers. You’ll get an idea of how it affects you.</p>
<p>Was the estate settled within 2008 or expected to be before the Fafsa is filed in 2/09? If not, it won’t affect the fafsa for school year '09-'10.</p>
<p>You may be able to benefit from the FAFSA simplified needs test or automatic 0 EFC. Under the simplified needs test people with income below $50k can have all their assets ignored by the FAFSA formula. For automatic 0 EFC those whose parents make under $30k receive an automatic 0 EFC. However the parents must also be eligible to file a 1040a or 1040ez tax return or someone in the family must receive means tested federal benefits.</p>
<p>To qualify for simplified needs or automatic 0 EFC your parents need to be very aware of doing anything that would make them ineligible for filing a 1040A or 1040 EZ. For instance selling stock makes them have to file a 1040 making you ineligible for simplified needs or automatic 0. This could make an enormous difference to your EFC as those assets would then be used in the EFC calculation.</p>