After a 6 year battle with cancer, my husband has passed away. My youngest 2 are just finishing their sophomore year of HS. One of them is very concerned about how these changes will impact financial aid. Since husband was already recieving disability (both SS and private), the twins will recieve survivors benefits. My husband also has a pension, which I may or may not start taking (he was 60 and I am 51). Additionally, I will be withdrawing from his 401K which as I understand will be taxed as income, but no penalty for withdrawal. Lastly, I will recieve life insurance that should cover a little over 2 years of living expenses.
This is all very new, his loss was both expected and sudden. He died 8 days ago. My son is looking for clarity at this moment and thinks answrs to these questions will help.
Both boys are high achievers, Ivy legacies with national and international awards so the plan was to apply to full need schools. I have been a Stay at Home Mom/caretaker. Son wants me to ask will SS be treated the same as normal income for financial aid purposes? Same question for life insurance? I will probably meet with a financial advisor before doing anything beyond paying monthly bills.
I don’t know the answers to your questions but wanted to send my condolences to you and your family. What a heavy burden for you and your children. I’m very sorry.
Hopefully a knowledgable poster will have the answer to your questions.
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If the social security goes to the sons and their income is low, it may not be taxable and won’t show up on tax forms. So the Adjusted Gross Incomes won’t show those amounts. If they are dependents than I am not sure if the social security is on your taxes- you would have to ask an accountant.
The life insurance, 401k and pension are all complicated questions that an accountant could answer, and the accountant could help you with decisions on whether to withdraw or not.
If your income is low, then social security would also not be taxable on your taxes and AGI.
Regardless, you can let college financial aid offices know of this “special circumstance.” For schools that use the CSI Profile there is a section for that. You can also call, email or meet in person with financial aid folks (but don’t talk to a student who might answer the phone!).
So sorry that your husband is gone. It is a major adjustment and your sons are young to go through this as well. I lost my father at 15 and understand. Hope they can go to the schools they want and that need is fully met financially as well as in all other ways.
I’m so sorry for your loss. It sounds like your younger sons are very strong students. That being the case, perhaps include schools where they would receive significant merit aid….which won’t consider your family finances at all.
I am so sorry for your loss. The first thing your family needs to worry about is getting through the next few weeks and months. I assume he was ill for awhile, but we are never truly prepared for losing a loved one.
When you meet with a financial advisor, you need to concern yourself with how best to position your money for your long term financial health. Paying for college will be part of that conversation, but you must make sure that you can take care of your own needs in the coming years.
Definitely be sure to add colleges where your kids would be sure to receive merit and/or colleges you are sure you can afford to college lists. You can contact the legacy school to ask about your situation and potential aid … but that is not something you should rush into. You need to figure out your financial situation before you can even have that discussion, and there will be time for that.
In the meantime, reassure your kids that you will figure out the college issues in time. Tell them that you have a lot to sort through, but that you will definitely address financing college as part of that.
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The insurance benefits are not income, but would be considered an asset if it is sitting in a regular savings account when you fill out FAFSA/CSS in a few years. There may be ways to cushion that (put it into a 529? ) It sounds like you may need to spend most of it for living expenses, and perhaps can put off taking 401k withdrawals which will be income.
It is good that you are thinking about this now, as you are deciding how to take the benefits. It’s all very confusing and getting a good plan now will help your kids feel better about their future.
I am so sorry to hear about your loss. You sound strong and your children wonderful. All of this has to be overwhelming. So much to process.
I am not a financial planner, but I do have a husband who has been very ill and on public/private disability for a few years, and a high school senior. I have run through the scenarios of how to pay for college.
Couple of observations: With disability payments: our private insurance payments deduct the ssdi from what they pay, and that ssdi should include payments to your kids. Meaning, you likely have already been dealing with the tax issue with social security, but may not know it. Do your kids get 1099’s from the SSA? My son does. But he doesn’t file taxes. Post-death Social Security probably won’t be more than ssdi, so I doubt it will change anything tax-wise for you. Your cpa will be able to confirm.
The Social Security payments your kids will get - will they end when they turn 18? If so, then it may not be an issue for them reporting income for financial aid. You would probably want to state clearly in the explanation section of the financial aid application that the income exists but will go away. No doubt you will be spending that money as it comes in every month, so you won’t have an asset accumulating that impacts financial aid.
The net price calculators do ask questions about public benefits. But I am not confident they fully capture the complicated situation you are in. Try them to get a sense of what the schools ask.
Thank goodness for life insurance. It isn’t enough and doesn’t replace what your family has lost, but it will help. I agree with the advice of spending out of that pot first. It is very smart of you to speak with a cpa now to figure all of this out. Maneuvering through the benefits and insurance can be overwhelming and you have a lot on your plate right now.
Please take care of yourself. I understand the need to get all of these issues sorted out right away, especially if your children are worrying about their future. But broad strokes, the income and insurance are going to be used for their intended purposes and likely won’t impact their financial aid prospects a couple of years down the line. You will have a clearer picture in about a year. These things take time to figure out, but you know enough right now to ease your kids’ minds on this one issue.
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Putting the life insurance proceeds in a 529 account instead of a regular savings account will do nothing to shelter the proceeds from financial aid reporting.
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One thing that you may consider is spending down the proceeds from the life insurance before you start withdrawing from the 401k/Pension if possible.
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@CateCAParent Thank you, I’m sorry you have also have gone through having a very ill husband. The private disability company denied my husband coverage in February. We had been fighting it since then, and weeks prior to his death hired a lawyer. In today’s mail was a letter from the insurance company saying they changed their decision, it was dated 2 days after he died. Good news in that back payments would be made, but just so so so frustrating.
Husband always did taxes, so no CPA, but will obviously need one going forward. I truly realize we are fortunate in many ways, my boys don’t have to worry about leaving their home or where their next meal will come from.
I have spent the last 6 years fighting for my husband, so it seems natural to continue fighting in some manner. I know I have a lot more grief to go through, but in a lot of ways I can see so much to be greatful for. After being a caretaker it was hard to see the positives. It’s almost like I fell in love with my husband all over again after he died. Hearing everything his friends and family said and seeing his kindness and caring in my 4 boys has been a gift.
The youngest will turn 18 in the fall of their senior year so will recieve Social Security payments until they graduate.
I will try to take your advice to take care of myself, my guess is you know how hard that is, so please also take care of yourself.
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I was going to quote specific parts of your post and respond bit by bit, but instead consider yourself hugged really tight. Sometimes there are no words.
Please feel free to dm me, anytime about anything. Happy to help if I can.
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