<p>I never said, or even suggested, otherwise. Not sure what your point is here.</p>
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<p>Absolutely correct, as long as it’s a legitimate gift.</p>
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<p>Agreed, as long as it’s reported as a student asset - because it is. (529 account excepted as far as reporting goes for FAFSA purposes.)</p>
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<p>Are you saying that since some do it it’s OK for others to do it as well?</p>
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<p>Some will… some won’t. I think that it would be very difficult to get a large enough sample size of schools willing to disclose how they use Profile data in order to figure out overall how many schools do and how many don’t. In your previous post, you didn’t make any distinction, simply saying that Profile schools consider 529 accounts to be student assets. I corrected you to avoid a misunderstanding.</p>
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<p>Not my personal experience… of course, YMMV.</p>
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<p>There can very often be a substantial tax advantage, especially at higher dollar amounts. Plus, the FAFSA treatment as a parent asset in all cases is huge for many families.</p>
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<p>I’m hoping that you don’t mean by whatever means possible.</p>
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<p>Again, as long as it’s a legitimate gift, fine.</p>
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<p>If the student expects to see the “gifted” money come back to him/her, of course there’s a risk. But if there’s no such expectation (as there shouldn’t be in the case of a legitimate gift), then there’s absolutely no risk involved.</p>
<p>I’m with MiddKidd on this as to what I have personally done with regards to my kid’s assets. </p>
<p>Cpt seems to think if others do it and you can get away with it, it somehow legitimizes it. I don’t think Cpt has any authority/standing to be giving this advice to others, at least no claims of authority that have been posted on this forum that I’ve seen. Maybe you can post which finaid officers you’ve asked if it’s legitimate.</p>
<p>Kgos16, I believe you have posted that you are a finaid officer. I’d be interested in your personal opinion if you want to post it. Same with kelsmom if willing. </p>
<p>I’ve never seen anything in any IFAP documents that addresses what is legitimate or not in handling student assets. But maybe there are other documents that finaid officers have access to that address this.</p>
<p>annoyingdad: Honestly, this is a hard one for me. We use the IFAP as well, and I even spoke with my supervisor about this - but as far as we know, there isn’t anything that speaks to how a student should/should not handle their assets. There isn’t a morality clause in the IFAP so to speak. I don’t think I could outright advise a student if they asked, “What can I do to lower my assets” to add a parent to their bank account, etc. Each staff member could have their own opinion on this topic and advise otherwise…I guess it all depends on how you personally view the matter.</p>
<p>Morally, I know that a student transferring funds to a parent’s account (or however they choose to do this) with the intention of getting the money back in the future, is working the system. For that matter, why bother going through that process and just write in a lower amount on the cash, savings, checking question. We are a FAFSA only school, so we essentially are holding students to their word when reviewing the FAFSA, even if they are selected for verification. Our asset verifying process is just a sheet that the family writes in the amount they have as of the day the FAFSA was filed. However, the question states “as of the day you file” and I can see people moving money around and having their answer still be technically “correct.”</p>
<p>We see cases where a student will file the FAFSA truthfully, realize their EFC is much higher than expected, and then go back to try to adjust the assets. At that point we go after more information from the family. I think students should have the same asset protection as parents. I personally believe it is unfair for a student who is working hard to save for college to have the assets hit at that rate, but I would likely remain neutral on the situation if a student asked about this issue and I was advising. </p>
<p>annoyingdad: Honestly, this is a hard one for me. We use the IFAP as well, and I even spoke with my supervisor about this - but as far as we know, there isn’t anything that speaks to how a student should/should not handle their assets. There isn’t a morality clause in the IFAP so to speak. I don’t think I could outright advise a student if they asked, “What can I do to lower my assets” to add a parent to their bank account, etc. Each staff member could have their own opinion on this topic and advise otherwise…I guess it all depends on how you personally view the matter.</p>
<p>Morally, I know that a student transferring funds to a parent’s account (or however they choose to do this) with the intention of getting the money back in the future, is working the system. For that matter, why bother going through that process and just write in a lower amount on the cash, savings, checking question. We are a FAFSA only school, so we essentially are holding students to their word when reviewing the FAFSA, even if they are selected for verification. Our asset verifying process is just a sheet that the family writes in the amount they have as of the day the FAFSA was filed. However, the question states “as of the day you file” and I can see people moving money around and having their answer still be technically “correct.”</p>
<p>We see cases where a student will file the FAFSA truthfully, realize their EFC is much higher than expected, and then go back to try to adjust the assets. At that point we go after more information from the family. I think students should have the same asset protection as parents. I personally believe it is unfair for a student who is working hard to save for college to have the assets hit at that rate, but I would likely remain neut. </p>
<p>I wonder if reimbursing parents for expenses would interfere with parents providing more than half of child’s support which as far I know is a requirement to claim child as dependent on taxes?</p>
<p>Each of my kids opened a bank account joint with me, when they went off to college. They could enjoy certain benefits under the umbrella of our long standing relationship with the bank and other holdings there and I could transfer funds nearly instantaneously at all times of day, even 3 am on a Sunday when necessary via computer. So it’s a perfectly normal move to have such an account. We aren’t eligible for fin aid, but had that been in the picture, particularly if we were Pell eligible so much the better . It’s not a matter of “getting away” with anything. There are intrinsic benefits of the arrangement. Most families have a flow of money between parent and child and this arrangement makes it easier to manage.</p>
<p>Also any interest earned on the account will go on the parent’s tax return is such accounts. I’ve found that though the rules for the IRS and fin aid do not line up all of the time, when it comes to verification, that it is so reported on the tax forms is what is most readily accepted.</p>
<p>No, it’s not right to give parents the money the day FAFSA is filed and then take it back. If selected for a full audit, that would not pass muster, most likely. Or do lie and not report the money. That is cheating. To spend down the money, give away the money, or put it in an account joint with the parents is fine. Parents and kids do this all of the time when the kid goes away to school or whereever.</p>
<p>But what I am advising is not playing games, IMO, but a smart course of action. When a student files FAFSA and finds he cuts self out of say PELL, we are not talking high income families. That;s a huge blow. Then to find out that the cause is because grandma left a college fun and the kid/parents were dutifully putting awaymoney for college and it was all put in he kid’s name in his acount, a source of shining pride in the family, is an issue. I see a number of kids in that predicament. Nobody thought to have the account joint tled with parent’s name first to avoid the 20% FAFSA EFC hit on kids. If someone did know this and took care o it a year before, 5 years before, 10 years, name the number of years and so titlled, there would be no discussion of this as we are having. Just shortening thetime period when having the fund so transferred when people focus on the FAFSA the year the kid is going to college. And those are the lucky ones who don’t find out when they file the FAFSA and get whammed.</p>
<p>You’re missing the point. It’s not the fact that the student’s money and the parent’s money is co-mingled in a joint account. It’s the fact that by doing this you feel that you can hide the student’s assets for financial aid reporting purposes. And you continue to rationalize by saying that it’s OK because other people are doing it too:</p>
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<p>If a student has a job and earns money (or receives money as a gift), that money is the student’s asset. Period. Putting it in a bank account shared with a parent, which is reported to the IRS under the parent’s name and SSN, doesn’t change that fact. A student’s asset, even in a joint bank account reported under a different SSN, still needs to be reported as belonging to the student when completing FA forms. Co-mingling the money with a parent doesn’t make this requirement go away.</p>
<p>" A much better (and completely ethical) way of accomplishing the goal of having student assets treated in the same manner as parent assets would be to use the student earnings to fund a student-owned 529 account. "</p>
<p>If the SOLE purpose of opening the student-owned 529 account is so their assets are treated the same as the parents,
you may consider that more ethical, but isn’t it still gaming the system? </p>
<p>And if you are “spending it down” just to avoid the hit on the assets, you are also gaming the system.</p>
<p>And if you are gaming the system, then how ethical are you truly being? You’re just picking the degree for your own personal code.</p>
<p>Not at all. First, there are other definite advantages to using a 529 account to save for college besides the FAFSA treatment. Second, the rule that allows student-owned 529 accounts to be treated as a parent asset was specifically created to encourage college savings through a 529 account. The government wants people to do this.</p>
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<p>Well, I personally have not encouraged or advised anyone to “spend down” their assets for the sole purpose of having less to be counted for financial aid purposes. If you spend it on something else, you don’t have it for college. Duh. I would advise that if you need to make a purchase anyway, especially a big ticket item, do it before you inventory your assets for financial aid. That’s common sense.</p>
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<p>I hope you can appreciate that there’s a difference between “gaming the system” but still abiding by the rules, and “gaming the system” by breaking the rules. Mischaracterizing assets in order to get better financial aid treatment is breaking the rules.</p>
<p>" Not at all. First, there are other definite advantages to using a 529 account to save for college besides the FAFSA treatment. Second, the rule that allows student-owned 529 accounts to be treated as a parent asset was specifically created to encourage college savings through a 529 account. The government wants people to do this. "</p>
<p>You were talking “ethics” of transferring student assets into a 529 in order to get the lower parental rate. I don’t consider that any more ethical than transferring that same money into a parental account, as the same result is intended. </p>
<p>Yes, the same result would be intended - but by using the 529, it has to go towards QHEE. That at least is going to justify it a little more in my mind if I was comparing the two options. </p>
<p>You are conveniently leaving out the fact that one is explicitly allowed (even encouraged) under the rules, and one is not allowed. That’s why doing the first is ethical while doing the second is not.</p>
<p>I can reduce my taxable income by $5,000 by contributing that amount to a regular (tax deductible) IRA, and I can “reduce” my taxable income by failing to report $5,000 of taxable income when I do my taxes. Same result, right? My taxable income is reduced by $5,000. Using your logic, since the result is the same, both actions are ethically equivalent.</p>
<p>^^No, failing to report income is explicitly against the law. Moving money between accounts is legal. Failing to report the income is both illegal and immoral, while the moving of funds is legal and the morality is left to the the individual as morality is not part of the tax code or FAFSA.</p>
<p>Go back and read my posts. I have never said that moving money between accounts is illegal (or unethical). I have said that reporting student assets as parent assets, absent a rule allowing one to do so (529 accounts) in unethical. Some posters here are claiming that placing student assets in a parent titled or a joint student-parent account somehow magically turns the student assets into parent assets, resulting in more favorable financial aid treatment. There is no magic at work, just dubious ethics.</p>
<p>I don’t find it unethical at all to do something that is legal. People move money all the time for all kinds of reasons, usually to save taxes. If the law allows an account to be set up for the parent to be listed first and control the money and the child WANTS to deposit it in that account, and FAFSA says that money held in such an account is reported as a parent’s asset, what is immoral about that? I wouldn’t do it in a million years with my parents as they don’t handle money well, but if that family feels it is best to co-mingle income, why not? Once it is moved, it is no longer a child’s asset(big risk), it is a family asset and if the ‘family’ (whoever is on the account) wants to spend it, the family can spend it. It is a risk to hand over the money.</p>
<p>If the FAFSA gang doesn’t want this to happen, they should change their reporting rules. Base the 20% on what the child earned, or change the parents’ allowance to 20%. FAFSA could average the assets the student held throughout the year, thus eliminating the value of last minute transfers. There is such a small number of people who benefit from this that it just doesn’t matter. There aren’t many college kids getting hit at the 20% rate who could move assets to their 5.6% parents and STILL qualify for aid that it isn’t worth it to change the rules.</p>
<p>Again - I have never said that the simple act of moving the money, or even putting student money in a parent or joint student-parent account, is illegal or unethical. You can stop pushing this argument on me.</p>
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<p>Please tell me where in the FAFSA instructions it says that student money held in a joint parent-student account is reported as a parent’s asset.</p>
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<p>Absolutely incorrect. Unless the student is knowingly making a legitimate gift, the asset continues to belong to the student, regardless of where it is held. If my child makes $40 babysitting and gives the cash to me to hold for safekeeping, does that then mean that I get to spend the money however I want? I hope your answer is “no.” In the same manner, if my child makes $2,000 over the summer waiting tables and the money is deposited in a joint bank account under my name and the child’s name, that doesn’t give me the moral or ethical right to spend the $2,000 however I want. The money remains an asset of the child, unless the child has told me that the money is a gift to me.</p>
<p>Once you change the name on the asset (change the deed, change the name on the account or deposit the money into another account) legally is it no longer the asset of the original earner or owner. Now it is retitled into the name on the account, deed, title, bond, whatever. You can change the deed on your mother’s house to your name and you can still consider it her house, but the county doesn’t care, the county considers it yours. The answer is yes, you can spend the babysitting money if it is in your bank account (and a lot of children hand over their earnings to their parents without any hope of getting it back). Any joint owner has a right to the entire account and the bank isn’t going to stop you from spending your daughter’s $2000; it’s also not going to stop her from spending your $20k in the account if her name is on it. The bank doesn’t care what moral obligations you have to your child. If the account is garnished by one of your creditors, your daughter can lose her money and if she is garnished you can lose your money too. Joint owners, joint liability. The tax laws say that the first named person reports the interest. Morally? Ethically? That’s between you and your child, but legally? It is your money. Say it was a lot of money and the interest earned was high. Do you think you could tell the IRS you were just holding that money for someone else? No, it’s yours and you pay the taxes on it. The benefits and liabilities of the account go with the named holder.</p>
<p>FAFSA instructs how to report the assets. Held in parent’s name (or first name on the account)? Report on parent’s page. Held in student’s name? Report on student’s page as a student asset. The FAFSA instruction do tell you how to report assets. There is a specific exception for 529 accounts that allows student accounts to be reported on parent’s page.</p>
<p>Yes, a bank won’t stop one joint account owner from draining the account, even if the other joint account owner earned and deposited the majority of the assets. But that won’t stop the aggrieved joint account owner from bringing a civil suit against the other joint account holder, and likely having a very good chance of recovering a judgment. The bank doesn’t know who contributed how much, so the bank can’t be responsible for any theft. But make no mistake, if someone takes something that doesn’t belong to them, that’s theft, which is punishable under law. In order to avoid this situation, folks should think long and hard about who they open joint bank accounts with.</p>
<p>If a student and parent have a joint bank account where each have contributed 50% of the account assets through earnings or gifts, are you claiming that the parent should be able to report 100% of the account assets on FAFSA? If so, based on what reading of the FAFSA instructions? Where does FAFSA say anything about which name appears first on an account?</p>
<p>“JOINT OR CUSTODIAL ACCOUNTS. In the case of a joint
account, each holder should report only 50 percent of the account
value. Custodial accounts that parents or grandparents establish
should be reported as the applicant’s assets.”</p>
<p>Although, this document is referring to asset verification on behalf of the school. Nothing is stated in detail on the FAFSA itself of how to handle this situation. </p>