My 15 year old niece’s father just passed away and left her 67,000$ of which she has for college. My question.
Does anyone know who’s name the money should go in to still allow her to get financial aide, scholarships and grants. NOT loans. My sister only makes about 38,000/year and would definitely qualify for grants. But my concern is that with the savings the government will no give her any help and hence she will not have enough money to pay for 4 years of college.
The money will still be an asset for financial aid. Having the money in mom’s name means it gets assessed at 5.6% rather than 20%.
Assets can be ignored for FAFSA purposes if certain conditions are met.
If he legally left it to her, then it is in her name.
Speak to a financial advisor. Perhaps opening a 529 in the mother’s name might help. I inherited a small amount from my aunt and used some of it to do a 529. In my state (NY) up to $5K per individual and $10K per couple is excludable from income for tax purposes so it was like getting a tax break as well.
Also, don’t forget that the girl may be eligible for social security benefits until I think age 19.
Sounds like the mom’s income may be low enough for the assets to be ignored…either way.
Make sure that the DD is on free/reduced lunch program. I think that qualifies.
Does $38K make you eligible for free or reduced lunch? I am just curious. I was on free lunch as a kid myself.
It’s best not to have assets in her name. She can gift the money to her mom (or anyone else) without any tax consequences up to $12K (maybe now $14K?) apiece each year and they, in turn, can put it into a 529 plan established by the mom in the kid’s name.
Google “simplified needs test”. This makes might apply to you. It is for Fafsa only schools. There is no simplified needs test for Profile schools.
Your niece should qualify for a Pell grant. And while loans are anathema for some, the most she could borrow as a freshman is $5500. Is the money legally is in niece’s name? If so, college would expect her to pay 20% of that 67K each year, and that could hurt aid. If in your sister’s name, it will not matter much.
It’s important to remember that it’s always better to have the money than not. It won’t affect merit aid at all. With Pell, she’d have over 20K a year, even without any help, and no loans. Above posters smarter than me have already mentioned exceptions for FAFSA and gifting money. Whatever the rules are, and however possession of this money shakes out, this loss would be a situation that fin aid offices would consider.
http://www.fns.usda.gov/fr-032316
Household of 2 with income up to $29,637 and household of 3 with income up to $37,296 can qualify for reduced lunch.
On the FAFSA it usually asks if in the last two years anyone in the household qualified for federal means tested benefit.
If income is under $50,000 then parent eligible to file a 1040A or being a dislocated worker are also ways to qualify for simplified needs.
The parent could qualify for SNAP or file a 1040a or 1040ez as the other qualifier for simplified needs test.
Yes, but you can’t file a 1040EZ, if you claim dependents.
The 1040A would be fine.
To qualify for simplified needs, the family must have income below $49,999 and one of the following three other criteria met:
- Qualifies for a means tested benefit like SNAP or ree/reduced lunch.
Or
- Is able to file a 1040A tax form.
Or
- Parent is a dislocated worker (this parent) is working so that doesn't apply).
This is a terrible idea. If she gifts the money to someone else, she no longer has control over it. The niece can use the inheritance to open a UTMA (custodial) 529 account, and name the mom as custodian. On FAFSA, the money will count as a parent asset, but it can only ever be used for the benefit of the niece.