My wife recently inherited land and, separately, a farm with its own land that is distinct from the land her mother owned personally. Given that land can be very hard to sell and very hard to estimate the value of, can anyone tell me if financial aid offices ever make special considerations in situations like this? Additionally, my wife is co-owner of this land with her sister, so couldn’t sell it without her ok even if she wanted to, or at least without creating a messy argument.
My wife grew up on the farm and it has been in business for over 70 years. She and her sister continue to operate it as a business. Obviously selling it isn’t something anyone wants to do. Am I correct in thinking that equity in a family business isn’t counted against you when applying for financial aid?
Just to give an example of how this effects our financial aid situation - before the inheritance the net price calculator for Skidmore showed us with a final cost of $30k/year, now (excluding the farm from the equation because I think assets of business are exempt) the Skidmore NPC shows us with a cost of $54k/year.
Are you lumping together the profits from operating the farm with the value of the asset? If your income has gone up because your wife now owns half of a profitable business, shouldn’t that mean that your contribution to your kids college education should go up as well?
The messy argument factor is irrelevant to the increase in your own income due to owning an ongoing business. Your wife could sell out to her sister, could borrow against the business, or keep it- and just pay the increase per the net price calculator.
What special consideration are you looking for-to have the profits of the business disregarded because your wife only owns half the farm? That will already be factored in- you won’t claim profits which go directly to your sister-in-law as half owner. To have the piece of non-farm land excluded from your assets? The value of the land is likely not that tough to calculate- since your wife just inherited it, the executor of the estate has surely had it assessed for tax purposes- or did his/her own assessment which is going to show up on the final tax return of the estate. Therefore, you have a very recent snapshot of what the land is “worth” (whatever assumptions were made when the land transferred title are likely good enough for financial aid purposes).
Let us help you… exactly what are you driving at???
Farm doesn’t have profits. It is an incorporated business, but it’s operated as a hobby farm. Sales are maybe $10k more than expenses in any given year. There is, however value to the land of the farm. I thought I read somewhere that family business assets are exempt - am I wrong?
Yes of course, our share should go up with our assets, that’s why I didn’t ask about the cash and modest house she inherited half of.
The land I was referring to selling is not part of the farm. Her mother owned land personally, in addition to the business. My question was about an asset that is difficult to value and difficult to liquidate, even if she didn’t share ownership. The value we have is that which the town has been using for assessment. I think it’s a good starting point, but should we actually try to sell the land it may end up selling for a wildly different price, perhaps much lower. An abutting piece of similar acreage (owned by someone else) has been on the market for over 5 years. Land is not a “liquid” asset, legally speaking.
MODERATOR’S NOTE: There is nothing wrong with a poster, especially an experienced one, asking for clarification. If you don’t want to clarify, that’s your prerogative, but you can’t comment negatively. I deleted part of post #2 and the response in post #3.
Assets in family businesses do count. Assets locked in to some arrangement also count. Even assets that won’t materialize for some time, eg, trusts that won’t be accessible til well after college. We’ve seen even properties that won’t sell for the mortgage amount count. A mess.
You do the best you can to estimate values. Generally, advice is not to use assessments as they can have odd formulas, discounts, etc.
Some broker can give some idea of potential sales value. Fine by me if that’s discounted. Eg, if the nearby property hasn’t sold, a reasonable/fire sale value could be far less per acre than they’re asking.
Just make it defensible. You may need Professional Judgment from the school’s FA. Is this inheritance all set or still an estate asset?
The detail needed will be a look back, someone else can explain that.
The value of family owned farm land kept me from qualifying for need based aid many years ago. It hurts because, as OP said, it’s not an asset you can just up and sell at a moment’s notice. And it was owned by my dad and his 2 brothers and never really divided up.
But it’s an asset (and one you are lucky to have) and does have to go on forms. After all you could (even if a hassle) sell it to pay for college - other people sell things or give up paying for other things in order to afford college. Not sure how we valued it at the time for FA purposes.
BTW, 40 years since I was applying to college and the family farm land is just now get sold and still a pain since uncle died and his widow gets stepped up basis others don’t - accounting mess so I understand your questions.
The farmer’s that I know (only a few of them) would all say the same thing. Unfortunately as far as I know the alleged value of the farm does impact the ability to get financial aid.
As blossom mentions above, a market appraisal of the inherited property should have been done or should be done as part of the process of settling the estate. For a number of reasons, the value of the estate at the time of death needs to be determined, and this includes the value of any included real property. Contact the person who is responsible for the estate and ask. An appraisal for estate purposes should be perfectly satisfactory for financial aid purposes, as long as there’s not too much intervening time. (Assessments by a municipal government for real estate tax purposes often do not reflect fair market value; a professional appraisal or recent sales history is much better.)
Thank you for the excellent responses. We realized before the inheritance came to pass that this could severely limit her options. Unfortunately it seems that will be the case. If she somehow manages to get into a top tier school we would find a way to pay for it, but I don’t think it would make sense to pay an extra $100k or more to send her to a school that is only somewhat better than our state university. Kind of a bummer, but not something to complain about too much in the grand scheme.
If your child has the stats to get into top tier schools…she will have PLENTY of good options available to her. You just may need to think about places where she can get decent merit aid, or (as you noted) the more affordable public options in your state.
The value of the land will be considered an asset. You mention that something is owned with a sister? If that is the case, only half of that value would be your asset (assuming the land was equally seeded to you both).
OP you might be surprised that shared ownership land has more potential for sale than expected, and liquidation may be an option to help pay for school if you so desire. I have had inquiries about a fairly small amount of farmland I inherited in the midwest that is shared ownership. At least in that area, shares are bought and sold periodically. Given the value of decent farmland there, the prices bandied about for buying shares are good and not significantly discounted. And yes, the value of this land (I rent it to someone to farm + get a fixed rental fee every year) did knock us out of any financial aid need consideration.
I don’t want to sound too whiny, I mean not qualifying for financial aid isn’t something to complain about. The land that isn’t part of the farm is connected to the farm and isn’t something anyone wants to sell, including me.
The responses I’ve received, though depressing, are very helpful. My daughter is only a h.s. sophomore. I anticipate that she will be able to get into schools ranked below 50 or so (50 and up, not 1-50). Before the inheritance I was excited that she would have options other than our state school, but now I don’t think she really has any. We could pay $60k for say, Syracuse (random example), but that doesn’t make sense when UNH is $25k.
Your feeling is something a lot of parents to go through. Is the cost of a private or OOS school worth the difference? We are blessed that we can afford it but that doesn’t necessarily mean spending the extra money is not a trivial decision. I agree with @thumper1, seek some schools that may offer some merit aid. They know they are competing against your state school and may try to close the gap a bit. Four private schools offered my son merit aid that brought the cost closer to what the public schools would cost.
123 Mom, what were your son’s scores, if you don’t mind my asking? Any schools in the Northeast I should look into that offer merit aid to good, but not outstanding students? My daughter is currently ranked around 10th in her class of 250 at a traditional public h.s. in NH. She took ACT and new SAT in 8th grade - 22/1100. Not bad, but she’ll probably be below 30/1400 as a senior. Will be enrolling her in SAT prep. Who knows, maybe she’ll exceed expectations on one of the tests.
I have been finding some possible options. UVM net price calculator comes out to high $30s with merit scholarships. New England public schools have the reciprocal agreement that gives students a discount if the major they want isn’t offered at their state school. She’s open to going to school in Canada, but they are experiencing a huge jump in applications, so McGill, a school that might have been within reach, has bumped up their minimum requirements quite a bit to the point where it seems unlikely she could get in, but maybe the Arts faculty.